Costco. The win-win.
Costco makes about 2% on what it sells, yet made $9.3 billion in profit last year. The most valuable asset in the warehouse is the person pushing the trolley.
THE GIST ON COSTCO: "The Win-Win"
How does Costco make money on 2%?
Walk in and you can buy anything from a rotisserie chicken to a hot tub. Costco caps the markup, so it makes about 2% on everything it sells, which barely covers the electricity and the wages. It basically breaks even on the products.
So where does the profit come from?
Last year it made $9.3 billion in profit, because the most valuable asset in the warehouse is the member walking around with a trolley.
What does Costco prove about subscriptions?
It shows you can have a good business and treat your customers right. Most subscription models extract: you pay forever and they erode what you get to make more money. Costco knows that is a race to the bottom, and proved 40 years ago that subscription and satisfaction can coexist.
Would you pay a yearly fee to shop somewhere cheaper?
Your take. One tap, then see how everyone else voted.
Quick answers
What margin does Costco make on products?
About 2%, which barely covers electricity and wages.
How much profit did Costco make last year?
$9.3 billion.
How is Costco different from other subscriptions?
Most extract more over time. Costco has shown for 40 years that subscription and satisfaction can coexist.
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