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 service stations. The same truck will in fact, in some instances, deliver fuel to What Time Does Costco Gas 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 exactly the same as at a brand name service station excluding a 1-5% additive difference, and in most cases 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 also must purchase a certain % of gas from refineries properties of the brand name. In contrast, Costco only orders from them if they’re the cheapest refinery.
This is the reason you hardly ever see brand unattended stations. Branded stores make their money on the $1.99 overpriced bottle of coke, not from your gas. Even unattended, a branded station costs far more to function than a Costco fuel station.
It may also help that Costco doesn’t take all charge cards, and therefore save millions in card processing fees.
Why do other gasoline stations charge so much more than Costco? There is this misconception that Costco sells gasoline being a loss leader to draw in more members.
Yes, they would like to have more members, however the company will not deliberately generate losses in 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 very own Kirkland Signature fuel additive. The cost is usually the spot market price, which can be pretty competitive to what other gas stations are spending money on their inventory.
Depending on the location in the warehouse, they are going to usually comp shop 4 gasoline stations (branded and independent) inside a certain radius of the warehouse. Every morning, a worker will drive around and get the costs from your 4 gas stations they comp shop on. The values are put into the AS400, and corporate gas department will call and tell the warehouse just how much the gas will sell for that day. An employee just must change the purchase price on the sign to mirror that prices which 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 gasoline stations sell maybe 3 truckloads Every Week. (Don’t think that neighborhood gasoline stations do not make any money 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 25-30-40 cents per gallon lower than another service stations. And and then there are other service stations which can be 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 the product, to ensure that particular Costco will still be making money on each gallon of gas sold, albeit a smaller amount compared to a Costco location with competing service stations which are not as aggressive on their pricing. The majority of the neighborhood service stations that aggressively price their fuel tend not to take charge cards. For the typical Costco member, the gasoline is still cheaper at Costco since they use their Costco charge card having a 4% rebate on gasoline.
The only real time that 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 will be greater than the earlier delivery earlier within the day. The neighborhood gasoline stations remain selling gas they bought 72 hours (even every week) ago, however right now we’re selling gasoline at the same price or just slightly lower compared to neighborhood service station is selling but at a higher acquisition cost. Through the times during the price volatility, comp shops of competing neighborhood gasoline stations may be completed repeatedly a day to see if one other ewgoqq stations may have adjusted their prices. Costco may and definately will adjust their price in the center of the day to make up competitors’ price changes as well as minimize losses.
Now, it works inversely as well. Because the gas prices in the wholesale market start to drop, each subsequent load of gasoline costs less than the one received the day before or even earlier inside the day. Because the neighborhood gas stations continue to have gas which they purchased at a 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 one other “ancillary businesses” (pharmacy, food court, tire center, photo center, meat, bakery, optical, service deli) within the ware