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It would be illogical to make gasoline a "loss leader" because, surely, there are people who visit the gas station and then jet out of there without going anywh
by ButlerianJihad 2mo ago
It would be illogical to make gasoline a "loss leader" because, surely, there are people who visit the gas station and then jet out of there without going anywhere else. A loss leader item is something that gets people in the door, puts their butt in a seat, and gets them to make a transaction that will include piling on other stuff. So if your Jumbo Jack is a loss leader, then you can charge $2.00 for sodas and $3.00 for French fries, and the same customer will probably also grab a $6 Oreo shake.
Someone who's filling up for gas may or may not go inside the Costco store proper. But the gasoline isn't going to influence their buying habits. If they "just need gas" that's all they'll get.
Conversely, I cannot see how a $1.50 hot dog is doing anything but losing money. It's a classic candidate for loss leader.
- cj 2mo agoIn rural America, getting someone into the parking lot isn’t much different than in the front door when the next box store is 10-20+ minutes away. It makes less sense in the suburbs.
- Spooky23 2mo agoThe average Costco ticket is $150 out the door. The retail margin is 11%, or $16.50. Say you fill the car with 15 gallons, and they lose $0.25/gallon. That’s $3.75. If 1/3 of the gas station customers go in the store, they’re making $5.50 from retail, less the gas losses they net $1.75. They make money, deny their competition business, and lock you mentally into saving money on gas and renewing that membership. That membership is half their operating income. I’m probably being pessimistic. One thing with Costco is they are incredibly efficient, so I’m sure they’ve baked out cost and overhead. You can see stuff like how they provide the minimum number of garbage cans.