One thing to understand is how the gas 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 in fact, sometimes, deliver fuel to What Time Does Costco Gas Close and then check out a Chevron/Shell/Valero/etc and deliver fuel there. The only real 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 usually 1-2%. Though the brand name stores must pay licensing and royalty fees to the brand name they operate under. Also the brand name stores also must buy a certain % of gas from refineries belonging to the brand name. In comparison, Costco only orders from them if they’re the most affordable refinery.
This is the reason you rarely 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 function than a Costco fuel station.
It can also help that Costco doesn’t take all charge cards, and so save millions in card processing fees.
How come other gas stations charge much more than Costco? There is certainly this misconception that Costco sells gasoline being a loss leader to draw in more members.
Yes, they would like to attract more members, nevertheless the company will not deliberately generate losses in the gas 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 very own Kirkland Signature fuel additive. The cost is often the spot market price, which can be pretty competitive as to what other gasoline stations are spending money on their inventory.
Depending on the location from the warehouse, they will likely usually comp shop 4 gasoline stations (branded and independent) inside a certain radius from the warehouse. Every day, a staff member will drive around and obtain the costs from your 4 service stations they comp shop on. The costs are entered into the AS400, and corporate gas department will call and tell the warehouse how much the gas will sell for your day. A staff member just needs to change the purchase price on the sign to reflect that prices that are downloaded straight to the pumps.
The warehouses I worked at averaged 4 – 5 truckloads (approximately 8800 gallons each) per day, while the majority of the surrounding service stations sell maybe 3 truckloads Per Week. (Don’t believe that neighborhood gasoline stations usually do not make any money selling gasoline) Depending on the area, you may have branded service stations that keep their price high, so Costco will definitely earn money on each gallon of gas even if they’re selling gas for 25-30-40 cents per gallon less than another gas stations. And and then there are other service stations that are aggressive on their pricing, and Costco will not beat that price but just match it. The stations which are aggressively pricing their fuel have a good margin on the product, in order that particular Costco is still making profits on each gallon of gas sold, albeit a lesser amount than a Costco location with competing gas stations which are not as aggressive on their own pricing. A lot of the neighborhood service stations that aggressively price their fuel do not take credit cards. For your typical Costco member, the gasoline continues to be cheaper at Costco because they use their Costco bank card using a 4% rebate on gasoline.
The sole time which i have encountered where we deliberately had 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 more than the earlier delivery earlier in the day. The neighborhood gasoline stations continue to be selling gas they bought three days (even per week) ago, but now we’re selling gasoline in the same price or just slightly lower compared to neighborhood service station is selling but at a higher acquisition cost. During the times of price volatility, comp shops of competing neighborhood gas stations may be performed repeatedly a day to find out if another ewgoqq stations may have adjusted their prices. Costco may and definately will adjust their price in the midst of the day to account for competitors’ price changes and to minimize losses.
Now, it really works inversely as well. As the gas prices in the wholesale market start to drop, each subsequent load of gasoline is cheaper compared to the one received the day before or even earlier in the day. Considering that the neighborhood gas stations still have gas which they purchased at a very 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 the other “ancillary businesses” (pharmacy, food court, tire center, photo center, meat, bakery, optical, service deli) in the ware