One thing to understand 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 gasoline stations. The same truck will in fact, sometimes, deliver fuel to https://locationsnearmenow.net/costco-gas-hours-what-time-does-costco-gas-open-close/ and then visit a Chevron/Shell/Valero/etc and deliver fuel there. The sole 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 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 also must purchase a certain % of gas from refineries belonging to the brand name. In contrast, Costco only orders from them if they’re the cheapest refinery.
This is why you almost never see name brand unattended stations. Branded stores make their cash on the $1.99 overpriced bottle of coke, not from your gas. Even unattended, a branded station costs a lot more to function when compared to a Costco fuel station.
It also helps that Costco doesn’t take all bank cards, and therefore save millions in card processing fees.
So why do other gasoline stations charge so much more than Costco? There is this misconception that Costco sells gasoline as being a loss leader to bring in more members.
Yes, they want to attract more members, however the company does not deliberately lose money in the gas stations. Costco buys their gasoline “off the rack” (Finding yourself 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 price is generally the spot market price, that is pretty competitive to what other service stations are spending money on their inventory.
Depending on the location in the warehouse, they will likely usually comp shop 4 gas stations (branded and independent) within a certain radius from the warehouse. Every day, a worker will drive around and get the costs from the 4 gas stations they comp shop on. The costs 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. A worker just has to 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 the majority of the surrounding service stations sell maybe 3 truckloads Every Week. (Don’t feel that neighborhood service stations 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 certainly generate income on each gallon of gas even if they’re selling gas for 20-30-40 cents per gallon under the other gasoline stations. And then there are other gas stations that are aggressive on their own 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 own product, so that particular Costco is still making money on each gallon of gas sold, albeit a smaller amount when compared to a Costco location with competing service stations that are not as aggressive on the pricing. Most of the neighborhood gasoline stations that aggressively price their fuel usually do not take credit cards. For your typical Costco member, the gasoline continues to be cheaper at Costco simply because they use their Costco credit card with a 4% rebate on gasoline.
The only time which i have encountered where we deliberately were required 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 will be more than the earlier delivery earlier within the day. The neighborhood service stations remain selling gas they bought 72 hours (even every week) ago, however we’re selling gasoline on the same price or just slightly lower compared to the neighborhood gas station is selling but with a higher acquisition cost. Through the times of price volatility, comp shops of competing neighborhood gas stations may be performed several times a day to see if the other ewgoqq stations may have adjusted their prices. Costco may and can adjust their price in the midst of the day to make up competitors’ price changes as well as minimize losses.
Now, it functions inversely as well. Since the gas prices in the wholesale market begin to drop, each subsequent load of gasoline is less expensive compared to the one received the day before or even earlier inside the day. Because the neighborhood gas stations continue to have gas they purchased at a high 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