One thing to comprehend 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 in fact, in some cases, deliver fuel to How Much Is Costco Gas and then go to 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 exactly the same as at a brand name gas station excluding a 1-5% additive difference, and in most cases 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 must also purchase a certain % of gas from refineries belonging to the brand name. In contrast, Costco only orders from them if they are the most affordable refinery.
This is the reason you hardly ever see brand unattended stations. Branded stores make their money on the $1.99 overpriced bottle of coke, not from the gas. Even unattended, a branded station costs far more to function than a Costco fuel station.
It also helps that Costco doesn’t take all charge cards, and therefore save millions in card processing fees.
How come other gas stations charge so much more than Costco? There is certainly this misconception that Costco sells gasoline as being a loss leader to draw in more members.
Yes, they wish to have more members, however the company fails to deliberately lose money on 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 generally the spot selling price, which can be pretty competitive as to what other service stations are investing in their inventory.
Depending on the location in the warehouse, they are going to usually comp shop 4 gas stations (branded and independent) in a certain radius of the warehouse. Every morning, a staff member will drive around and get the values from your 4 service stations they comp shop on. The values are entered into the AS400, and corporate gas department will call and tell the warehouse how much the gas will sell for that day. A staff member just needs to change the purchase price on the sign to mirror that prices that are downloaded directly 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 feel that neighborhood gas stations do not make money selling gasoline) Depending on the area, you may have branded service stations that keep their price high, so Costco will certainly earn money on each gallon of gas even if they’re selling gas for 20-30-40 cents per gallon lower than one other gasoline stations. And then there are other gas stations which are aggressive on their pricing, and Costco will never beat that price but just match it. The stations that are aggressively pricing their fuel continue to have a good margin on their product, in order that particular Costco is still making money on each gallon of gas sold, albeit a lesser amount compared to a Costco location with competing gasoline stations that are not as aggressive on their own pricing. The majority of the neighborhood service stations that aggressively price their fuel tend not to take credit cards. For your typical Costco member, the gasoline remains cheaper at Costco since they use their Costco credit card having a 4% rebate on gasoline.
The only real time that I have encountered where we deliberately needed 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 would be more than the prior delivery earlier inside the day. The area gas stations remain selling gas they bought 72 hours (even every week) ago, but now we’re selling gasoline in the same price or just slightly lower compared to neighborhood gas station is selling but in a higher acquisition cost. Throughout the times of price volatility, comp shops of competing neighborhood service stations may be completed many times a day to determine if one other ewgoqq stations may have adjusted their prices. Costco may and definately will adjust their price in the center of the day to make up competitors’ price changes as well as minimize losses.
Now, it really works inversely as well. Because the gas prices within the wholesale market commence to drop, each subsequent load of gasoline costs less compared to one received the day before or even earlier inside the day. Because the neighborhood gas stations have gas they bought at a higher price, they haven’t drop their prices yet, and Costco can start lowering prices and 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