| ▲ | 0cf8612b2e1e a day ago |
| Costco gas is famously a loss leader, typically running 15 to 20 cents below surrounding stations.
Is this true? I always assumed that Costco just had better deals/longer horizon commitments so it could undercut local stations. Maybe they even own a refinery just to maintain the best margin. |
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| ▲ | shrubble 20 hours ago | parent | next [-] |
| They are selling 10000 gallons a day at some locations, so I find it hard to believe. More like they don’t have a need to make a profit and they run the station in a barebones manner on real estate that they get as part of the larger site. So it would be a loss leader for anyone else. |
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| ▲ | ashley95 5 minutes ago | parent [-] | | If they lose 10c/gal, it still sounds like an incredibly small amount in the grand scheme of things and like a great loss leader? |
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| ▲ | xenadu02 3 hours ago | parent | prev | next [-] |
| When you have a bunch of stores you do sign distribution deals with a nationwide distributor. If you buy enough fuel you might even be able to sign with an oil company that has refining capacity or their own distribution arm. So Costco is definitely not paying the same price as your local convenience store. But they aren't getting a 35% discount either. As many others have noted: Costco does not do loss-leaders. They're likely selling at cost or a very small profit above cost. When we bought a house in 2021 I had 9.6kW of solar installed (and 20kWh of battery) and bought our first electric car. Since replaced it and have two electric cars now. At times like this I'm thankful for that. I make my own driving energy on my roof, covering over 80% of all driving and home electric usage. |
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| ▲ | bluGill 2 hours ago | parent [-] | | Nobody is signing a national contract for gasoline. It all comes from the local refinery, or in some cases a pipeline to a slightly more distant refinery. The final shipping is by truck and it's almost never the case that you can find a different place that you could drive a truck to that's cost effective. Shipping guests. A few more miles by truck, it's only a few dollars different, and so it doesn't cost much difference per gallon. However, when we're talking 100 miles, now you're talking about significantly more money and that shows up in the pump price. Worse, even if you are willing to pay the price, every state has different specific rules for gasoline and so there is a very high odds that only your local refinery can make the correct gasoline for your local area. What national chains can do is specify the additive that the refiner adds. Anyone other than a national chain doesn't have enough profit to be worth trying to build their own additive package and takes the standard additives the refinery has, which are almost always a good package anyway. | | |
| ▲ | edot 40 minutes ago | parent | next [-] | | This is mostly wrong, sorry. Big chains absolutely do sign national or huge regional supply agreements for gasoline, e.g. Pilot/Flying J, Buc-ee’s, Sheetz, Costco, Sam’s Club, Speedway, etc. You have two main errors: 1) conflating refineries with terminals 2) forgetting that fuel is a fungible financial product. There are terminals all over the country, within trucking distance of the stations they serve. Those terminals can be supplied by a nearby refinery, yes, but also one or more distant refineries connected to a pipeline or via ship, train, or barge. There is an entire swath of the energy market called "midstream" that handles this. Once a refined fuel gets into a terminal, its refinery of origin stops really mattering for contract purposes because of swaps. Exxon can supply gasoline in one market while Marathon supplies an economically equivalent amount somewhere else. Nobody is moving “Exxon molecules”. I mean, it literally all goes into the same tank if it's the same product. They (the terminal) just keep track of who supplied how much. The detergent package is also mixed in at the terminal loading rack, along with ethanol in the case of gas, not at the refinery. Also, very few states actually have specific rules. California is the only real pain in the butt. You might be thinking of summer vs. winter blends, where the refiners adjust the vapor pressure to reduce emission in the summer and to increase ease of engine starting in the winter. This is something every refinery can and easily does. | |
| ▲ | giardini 2 hours ago | parent | prev | next [-] | | Do we know how Costco's "additive package" rates relative to other providers (e.g., Shell's) additive packages? Currently I buy Shell gas b/c I trust that it's good for my car's engine. Can I trust that Costco's gas is as good as Shell's? | | |
| ▲ | qmr an hour ago | parent [-] | | You should be looking for "top tier" gas, which Costco sells. | | |
| ▲ | edot 38 minutes ago | parent [-] | | Correct. Beyond that, doesn't matter. Go to where the fuel is the freshest (hasn't collected water, sat in a rusty tank for a long time, etc.). So, also probably Costco. |
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| ▲ | r58lf 2 hours ago | parent | prev [-] | | weird fact. there's no refineries in florida. All the gasoline in south florida comes in via ship/barge. |
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| ▲ | PessimalDecimal 5 hours ago | parent | prev | next [-] |
| The Acquired episode about Costco (https://www.acquired.fm/episodes/costco) claims they don't do loss leaders at all. |
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| ▲ | ButlerianJihad 5 hours ago | parent [-] | | It would be illogical to make gasoline a "loss leader" because, surely, there are people who visit the gas station and then jet out of there without going anywhere else. A loss leader item is something that gets people in the door, puts their butt in a seat, and gets them to make a transaction that will include piling on other stuff. So if your Jumbo Jack is a loss leader, then you can charge $2.00 for sodas and $3.00 for French fries, and the same customer will probably also grab a $6 Oreo shake. Someone who's filling up for gas may or may not go inside the Costco store proper. But the gasoline isn't going to influence their buying habits. If they "just need gas" that's all they'll get. Conversely, I cannot see how a $1.50 hot dog is doing anything but losing money. It's a classic candidate for loss leader. | | |
| ▲ | cj 3 hours ago | parent [-] | | In rural America, getting someone into the parking lot isn’t much different than in the front door when the next box store is 10-20+ minutes away. It makes less sense in the suburbs. |
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| ▲ | mikestew 5 hours ago | parent | prev | next [-] |
| During what I seem to recall was an earnings call about ten years ago, it was stated that Costco doesn't do loss-leaders. What they more likely do is sell the gas close to cost. |
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| ▲ | loco5niner 3 hours ago | parent [-] | | Their rotisserie chicken is certainly a loss leader, even if they don't call it that. | | |
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| ▲ | all2 2 hours ago | parent | prev | next [-] |
| It's not true where I live. Costco is on average 5-10c more expensive than the cheaper places near me. |
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| ▲ | teruakohatu 15 hours ago | parent | prev | next [-] |
| Selling below the price of surrounding stations doesn’t mean they are losing money on the fuel. Costco has a single store in my country and it’s butter that they sell cheaply to get people in the door. But I doubt they are losing money on it. |
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| ▲ | wyre 21 hours ago | parent | prev [-] |
| It makes sense. The ~$10 someone saves pumping at Costco is easily made up in the >$100 shopping trip they are making, or compared to lifetime spend. |
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| ▲ | bryanlarsen 7 hours ago | parent [-] | | No it doesn't. Costco has a gross profit margin of 11% and a net profit margin of 3%. Losing $10 to make $3 isn't viable. | | |
| ▲ | basch 7 hours ago | parent [-] | | Costco isnt losing $10. They can sell gas at cost to run a gas station if they want to. They break even and get people there instead of a normal gas station. |
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