How Costco Makes Money (Hint: It's Not the Hot Dogs)

Two hundred seventy-five billion dollars moved through Costco last year. They kept under three cents on the dollar. Gross margin eleven point one two percent, operating margin three point seven seven, net margin two point nine four. So here's the thing everyone says next, and you've probably said it yourself... the merchandise is basically a loss leader, and the membership card is where ALL the profit is. That was close to true. In fiscal twenty twenty-three, fees were fifty-six point four percent of operating income. Half the company, sold at the door. But in the year that just closed, that number came in at fifty point six percent. It's been falling. Every single year. Sixty-five dollars a year for the basic card.Executive is a hundred and thirty, double the price, and it pays you two percent back on eligible purchases. That sixty-five was a raise, the first since June twenty seventeen. Five dollars, sixty to sixty-five. Seven years without touching the price... that restraint is the whole story. Because that's the other half of the handcuff. Costco won't raise your fee, and it won't raise its markups either... so where does the money come from?