One thing to understand is the way the gas station industry works. The gas you get at Costco is the same gas you get Chevron, Shell, Valero, or other gasoline stations. The same truck will in fact, in some instances, deliver fuel to Costco Gas Station Hours Of Operation and then check out 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 identical to at a brand name service station excluding a 1-5% additive difference, and often 1-2%. Nevertheless the brand name stores must pay licensing and royalty fees to the brand name they operate under. Also the brand name stores should also invest in a certain % of gas from refineries owned by the brand name. In comparison, Costco only orders from them if they’re the least expensive refinery.
This is why you almost never see name brand unattended stations. Branded stores make their funds on the $1.99 overpriced bottle of coke, not through the gas. Even unattended, a branded station costs a lot more to function compared to a Costco fuel station.
It can also help that Costco doesn’t take all charge cards, and so save millions in card processing fees.
Why do other gas stations charge a lot more than Costco? There exists this misconception that Costco sells gasoline as being a loss leader to attract more members.
Yes, they wish to get more members, however the company fails to deliberately lose cash at 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 particular Kirkland Signature fuel additive. The purchase price is usually the spot market price, which can be pretty competitive from what other service stations are paying for their inventory.
Depending on the location in the warehouse, they are going to usually comp shop 4 gasoline stations (branded and independent) within a certain radius of the warehouse. Every day, a worker will drive around and get the costs through the 4 gas stations they comp shop on. The prices are entered into the AS400, and corporate gas department will call and tell the warehouse exactly how much the gas will sell for the day. An employee just must change the purchase price on the sign to mirror 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 a lot of the surrounding gas stations sell maybe 3 truckloads Every Week. (Don’t feel that neighborhood service stations do not make any cash selling gasoline) Depending on the area, you may have branded gas 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 another gas stations. And then there are other service stations which can be aggressive on their pricing, and Costco will never beat that price but just match it. The stations which can be aggressively pricing their fuel still have a decent margin on their product, so that particular Costco is still making money on each gallon of gas sold, albeit a reduced amount when compared to a Costco location with competing gas stations which are not as aggressive on their own pricing. A lot of the neighborhood gas stations that aggressively price their fuel usually do not take bank 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 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 greater than the earlier delivery earlier in the day. The area gasoline stations remain selling gas they bought three days (even every week) ago, however right now we’re selling gasoline at the same price or just slightly lower compared to the neighborhood service station is selling but in a higher acquisition cost. Through the times of price volatility, comp shops of competing neighborhood service stations may be performed repeatedly a day to find out if one other ewgoqq stations may have adjusted their prices. Costco may and can adjust their price in the middle of the day to account for competitors’ price changes as well as minimize losses.
Now, it works inversely as well. As the gas prices inside the wholesale market commence to drop, each subsequent load of gasoline is less expensive than the one received the day before or even earlier in the day. Since the neighborhood gasoline 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 service station, just like one other “ancillary businesses” (pharmacy, food court, tire center, photo center, meat, bakery, optical, service deli) inside the ware