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I know this is true but I find it so hard to believe. Are there really that many people out there not getting value out of their memberships? I saved enough mon

I know this is true but I find it so hard to believe. Are there really that many people out there not getting value out of their memberships? I saved enough money on tires compared to everywhere around me to cover multiple years of my membership fees. I guess the math just lines up in a way I don't understand.

infecto 2y ago
Its simply that the inventory they sell is most likely priced in such a way that it covers the cost of the product and its existence inside of the warehouse. Costco has very aggressive vendor terms and they sell the inventory before they are having to pay the vendor for it. Said another way, they break even or have slight margin on selling products, this includes the executive membership annual check.
- trescenzi 2y ago
  Right ok that makes sense.
eddd-ddde 2y ago
They dont lose money on those sells, rather they just don't markup like everyone else does. The mark-up on products tends to be so big that it looks impossible to buy at Costco prices without costing them money.
- katzinsky 2y ago
  Aldi is usually still cheaper per unit IME.
tiktir 2y ago
I doubt there is very little cost to memberships for Costco. So it has extremely high margins. Since the products that are being sold in Costco are close to wholesale they also carry a margin, just not as high. So even if 100% of the memberships were used, they would still make a nice tidy profit. Purely because the products literally pay for themselves. This is primarily due to how Costco has low costs to having little need for additional warehouses outside of their public warehouses. Their cost of goods sold vs revenue is about 87%. So about 13% profit. That is just the goods themselves. So the more I think about this, there has to be some sort of cost to memberships. Especially for people arriving, because if there was no cost, why implement these scanners? While memberships help with profit, there is a huge cost to implementing something that could scare your customers away. I also think the whole "makes a majority of their money" needs further explanation. The highest percentage of their profit is from the membership fees. The highest percentage of revenue is from the goods sold is my bet.
- infecto 2y ago
  Typically closer to 89-90%. Costco generally makes a 10% project. Merchandise is practically break even and memberships is where all the money is coming from. Merchandise and sga together is 98%. Circling back to the insight that costco is designed to make profit from its memberships and not its merchandise, though they are certainly making margin off selling items as well. That's why they go through phases of cracking down on memberships.

infecto 2y ago

Its simply that the inventory they sell is most likely priced in such a way that it covers the cost of the product and its existence inside of the warehouse. Costco has very aggressive vendor terms and they sell the inventory before they are having to pay the vendor for it. Said another way, they break even or have slight margin on selling products, this includes the executive membership annual check.

trescenzi 2y ago
Right ok that makes sense.

eddd-ddde 2y ago

They dont lose money on those sells, rather they just don't markup like everyone else does. The mark-up on products tends to be so big that it looks impossible to buy at Costco prices without costing them money.

katzinsky 2y ago
Aldi is usually still cheaper per unit IME.

tiktir 2y ago

I doubt there is very little cost to memberships for Costco. So it has extremely high margins. Since the products that are being sold in Costco are close to wholesale they also carry a margin, just not as high. So even if 100% of the memberships were used, they would still make a nice tidy profit. Purely because the products literally pay for themselves. This is primarily due to how Costco has low costs to having little need for additional warehouses outside of their public warehouses. Their cost of goods sold vs revenue is about 87%. So about 13% profit. That is just the goods themselves. So the more I think about this, there has to be some sort of cost to memberships. Especially for people arriving, because if there was no cost, why implement these scanners? While memberships help with profit, there is a huge cost to implementing something that could scare your customers away. I also think the whole "makes a majority of their money" needs further explanation. The highest percentage of their profit is from the membership fees. The highest percentage of revenue is from the goods sold is my bet.

infecto 2y ago
Typically closer to 89-90%. Costco generally makes a 10% project. Merchandise is practically break even and memberships is where all the money is coming from. Merchandise and sga together is 98%. Circling back to the insight that costco is designed to make profit from its memberships and not its merchandise, though they are certainly making margin off selling items as well. That's why they go through phases of cracking down on memberships.