One thing to know is just how the service station industry works. The gas you get at Costco is the same gas you get Chevron, Shell, Valero, or other service stations. The same truck will actually, in some cases, deliver fuel to Costco Gas Hours Of Operation and then visit a Chevron/Shell/Valero/etc and deliver fuel there. The only difference is the additive they add to the gas at each station. The amount of additive is minimal, maybe 50 gallons per thousand of gas. Thus the gas you buy at Costco is identical to at a brand name service station excluding a 1-5% additive difference, and often 1-2%. However the brand name stores must pay licensing and royalty fees to the brand name they operate under. Also the brand name stores must also purchase a certain % of gas from refineries properties of the brand name. In comparison, Costco only orders from them if they’re the most affordable refinery.
For this reason you hardly ever see brand name unattended stations. Branded stores make their money on the $1.99 overpriced bottle of coke, not from your gas. Even unattended, a branded station costs far more to use compared to a Costco fuel station.
It can also help that Costco doesn’t take all credit cards, and thus save millions in card processing fees.
Why do other gasoline stations charge a lot more than Costco? There is certainly this misconception that Costco sells gasoline being a loss leader to draw in more members.
Yes, they wish to have more members, however the company will not deliberately generate losses in the gasoline stations. Costco buys their gasoline “off the rack” (Being in SoCal, I’ve seen invoices from Chevron, Valero, Arco, Shell, ExxonMobil), where most independent stations buy their fuel from as well, then add their particular Kirkland Signature fuel additive. The price is usually the spot market price, which is pretty competitive from what other gasoline stations are investing in their inventory.
Depending on the location of the warehouse, they will usually comp shop 4 gas stations (branded and independent) in a certain radius from the warehouse. Every morning, a worker will drive around and acquire the costs from your 4 gasoline stations they comp shop on. The prices are put into the AS400, and corporate gas department will call and tell the warehouse how much the gas will sell for your day. A worker just needs to change the cost on the sign to mirror that prices which can be downloaded right to the pumps.
The warehouses I worked at averaged 4 – 5 truckloads (approximately 8800 gallons each) per day, while a lot of the surrounding gas stations sell maybe 3 truckloads Every Week. (Don’t feel that neighborhood gas stations tend not to make money selling gasoline) Depending on the area, you may have branded gas stations that keep their price high, so Costco will surely generate income on each gallon of gas even if they’re selling gas for 20-30-40 cents per gallon lower than the other gas stations. And there are other service stations which are aggressive on their own pricing, and Costco will never beat that price but just match it. The stations which can be aggressively pricing their fuel still have a decent margin on their own product, so that particular Costco is still making profits on each gallon of gas sold, albeit a reduced amount than a Costco location with competing gasoline stations that are not as aggressive on their pricing. The majority of the neighborhood service stations that aggressively price their fuel tend not to take credit cards. For that typical Costco member, the gasoline remains cheaper at Costco because they use their Costco bank card using a 4% rebate on gasoline.
The only time i have encountered where we deliberately were required to sell gasoline at a loss was during sudden spikes in gas prices. Since Costco turn their fuel inventory so quickly, each new delivery on the same day could be higher than the earlier delivery earlier within the day. The area gasoline stations are still selling gas they bought three days (even every week) ago, however right now we’re selling gasoline at the same price or just slightly lower compared to neighborhood gas station is selling but in a higher acquisition cost. During the times of price volatility, comp shops of competing neighborhood gasoline stations may be done repeatedly a day to find out if the other ewgoqq stations may have adjusted their prices. Costco may and will adjust their price in the middle of the day to make up competitors’ price changes and also to minimize losses.
Now, it functions inversely as well. Since the gas prices within the wholesale market commence to drop, each subsequent load of gasoline is less expensive compared to one received the day before or even earlier within the day. Because the neighborhood gasoline stations have gas that they bought at a high price, they haven’t drop their prices yet, and Costco can start lowering prices but still make decent margins on each gallon of gas.
The gas station, just like one other “ancillary businesses” (pharmacy, food court, tire center, photo center, meat, bakery, optical, service deli) inside the ware