Costco Gasoline Price Is Cheap

2024 Author: Steven Freeman | [email protected]. Last modified: 2023-12-17 08:15

Costco's wholesale stores offer products of all kinds, from car tires and fresh bread to delicious and inexpensive roast chicken. But have you ever wondered why Costco gasoline is so cheap? How is it that the company manages to sell the gallon of fuel for many pennies less than the competition?

"Costco sells" premium "gasoline with a small profit margin because it sells A LOT of it," says Thomas Glen, Costco's marketing manager (2017-to-date) on the Quora blog. "Most gas stations fill once or twice a week, while Costco receives deliveries TWICE PER DAY."

Another reason? Despite the fact that gasoline prices rise and fall with market demands and other global market factors, Costco can absorb the losses from such fluctuations because gasoline is actually one of Costco's money-losing businesses.

Another crucial difference is that although Costco sells the same gasoline that they ship at Chevron, Shell, Valero and other gas station companies, they can compare it at cheaper prices because they don't pay royalties to use the logos of the refineries that supply them.

Costco achieves these prices by managing the companies that run the gasoline business in its warehouses. According to The Washington Post, in March 2012 Costco created the CWC WDC LLC subsidiary companies that operate gas stations.

"All we try to do is sell things cheaper than anyone else, but that requires a lot more work," Jim Sinegal, Costco CEO, told CNBC in 2014.

At the end of the day the idea is to increase Costco's traffic and sales volume and gasoline is one of many ways they can do this.