‘They’re Getting Insider Information From Costco Employees’: Inside the Pokemon Card Line Where Resellers Buy Executive Memberships

Resellers lining up for Pokemon cards at one Costco (NASDAQ:COST | COST Price Prediction) warehouse pay to join Discord servers that tell them where the next card drop will hit. According to one witness, they also get “insider information from Costco employees.”

The account comes from Christa DiBiase, co-host of The Clark Howard Podcast. She described her own local warehouse on an episode that aired November 13. She walked in for a vitamin and found a long line at the returns area. Staff checked in and scanned shoppers, marked their hands and sent them to a separate line with a one-pack limit.

She said many people in line had bought Executive memberships mainly to resell the cards. They worked in groups, changed clothes to get back in line and traded cards and credit cards with each other. Employees, she said, must be clocked out and wait in line like everyone else. She had “never seen [Costco employees] so frustrated.” She did not verify the employee-tip claim herself, and her story describes the experience at one warehouse.

Scalpers Are Paying Into Costco’s Profit Engine

Here is the irony for Costco shareholders. On November 11, Jim Cramer told CNBC viewers: “They make their money on the card, not at the register.”

Costco’s results back him up. The company ended its fiscal fourth quarter with 42.3 million paid Executive members, up 9%. Membership fee income rose 7% to $1.85 billion. Every reseller who upgrades for a card pack sends money into the company’s highest-margin revenue line.

That revenue helps fund big payouts to shareholders. On November 10, Costco declared a $30 per-share special dividend, payable December 4. It also renewed its $4 billion stock buyback program.

Why Most Card Flippers Overpay for the Executive Tier

A Gold Star membership costs $65 a year. Executive costs $130 and pays a 2% reward on qualifying purchases, capped at $1,250 a year. The upgrade is just a spending test. A shopper who shows up mainly for one limited pack of cards will almost always fail it.

The break-even math is simple. At 2% back, you need $3,250 in qualifying purchases a year to earn back the $65 upgrade. Below that number, you are paying Costco for rewards you never get.

Consider this case. A reseller spends $1,000 a year at Costco, mostly on card packs and a few snacks. That earns $20 in rewards. Against the $65 upgrade, the reseller is $45 behind before selling a single pack. A paid Discord subscription raises the cost of every pack even more.

Your Annual Spend Decides Whether the Upgrade Pays

One variable settles the question: how much you really spend at Costco in a year. Here are two example households.

A household spending $200 a month puts $2,400 through the register in a year. Its reward comes to $48, so the upgrade costs it $17 a year. Gold Star wins.

A household spending $500 a month reaches $6,000 a year. Its reward is $120, leaving it $55 ahead after paying for the upgrade.

At $6,500 in spending, the reward covers the full $130 fee. The $1,250 cap doesn’t kick in until $62,500 a year.

Costco’s own numbers show where the spending is. Executive members accounted for 76% of sales in the fourth quarter. Management says they spend more than Gold Star members and renew at higher rates. In the U.S. and Canada, the renewal rate is 92%.

Run Your Own Break-Even Before Your Next Renewal

1. Pull your actual spending. Check your Costco account or app and add up your warehouse and online purchases for the past 12 months. Use your real receipt history instead of a guess, because the whole decision depends on this one number.
2. Apply the 2% test. Check Costco’s Executive membership terms for categories that don’t earn the reward, and take those out first. Multiply what’s left by 2% and compare the result to the $65 upgrade cost.
3. Downgrade if you fall short. If your qualifying spending is under $3,250, switch to Gold Star at renewal. You keep the difference, and you can upgrade again later if your spending rises.
4. Count the full cost of flipping. If you’re buying Executive to go after card drops, add any net loss on the upgrade and any Discord fees to your cost per pack before you figure your resale profit. A one-pack limit spreads those fixed costs over very few cards.

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