One thing to know is just how the gas station industry works. The gas you get at Costco is the same gas you get Chevron, Shell, Valero, or other gas stations. The same truck will in fact, sometimes, deliver fuel to What Time Does Costco Gas Close and then visit 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 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 should also buy a certain % of gas from refineries properties of the brand name. In comparison, Costco only orders from them if they’re the least expensive refinery.
This is why you almost never see brand name unattended stations. Branded stores make their funds on the $1.99 overpriced bottle of coke, not from your gas. Even unattended, a branded station costs far more to function when compared to a Costco fuel station.
It also helps that Costco doesn’t take all credit cards, and so save millions in card processing fees.
How come other gas stations charge a lot more than Costco? There exists this misconception that Costco sells gasoline being a loss leader to bring in more members.
Yes, they would like to have more members, however the company does not deliberately lose cash on the gas stations. Costco buys their gasoline “off the rack” (Staying 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 own Kirkland Signature fuel additive. The purchase price is often the spot market price, which is pretty competitive from what other gasoline stations are paying for their inventory.
Depending on the location of the warehouse, they will likely usually comp shop 4 service stations (branded and independent) within a certain radius from the warehouse. Every morning, an employee will drive around and acquire the prices from the 4 gasoline stations they comp shop on. The values 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 staff member just needs to change the price on the sign to reflect 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 most of the surrounding service stations sell maybe 3 truckloads Every Week. (Don’t believe that neighborhood gasoline stations usually do not make any money selling gasoline) Depending on the area, you may have branded gasoline stations that keep their price high, so Costco will definitely make money on each gallon of gas even if they’re selling gas for 25-30-40 cents per gallon lower than one other gas stations. And there are other gas 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 still have a reliable margin on their product, so that particular Costco is still making money on each gallon of gas sold, albeit a reduced amount compared to a Costco location with competing gas stations that are not as aggressive on the pricing. The majority of the neighborhood gasoline stations that aggressively price their fuel tend not to take charge cards. For that typical Costco member, the gasoline is still cheaper at Costco since they use their Costco charge card with a 4% rebate on gasoline.
The only time which i have encountered where we deliberately had to sell gasoline confused 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 previous delivery earlier inside the day. The area gas stations continue to be selling gas they bought 3 days (even a week) ago, however we’re selling gasoline in the same price or just slightly lower compared to neighborhood service station is selling but with a higher acquisition cost. Throughout the times during price volatility, comp shops of competing neighborhood gas stations may be performed many times a day to determine if the other ewgoqq stations may have adjusted their prices. Costco may and will adjust their price in the center of the day to account for competitors’ price changes and to minimize losses.
Now, it works inversely as well. Because the gas prices in the wholesale market commence to drop, each subsequent load of gasoline costs less than the one received the day before or even earlier within the day. Because the neighborhood gas stations continue to have gas they bought at a very high price, they haven’t drop their prices yet, and Costco can start lowering prices yet still make decent margins on each gallon of gas.
The service station, just like another “ancillary businesses” (pharmacy, food court, tire center, photo center, meat, bakery, optical, service deli) inside the ware