One thing to comprehend 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 would really, sometimes, deliver fuel to Costco Gas Station Hours 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 exactly the same as at a brand name service station excluding a 1-5% additive difference, and usually 1-2%. Though the brand name stores must pay licensing and royalty fees to the brand name they operate under. Even the brand name stores also must invest in a certain % of gas from refineries properties of the brand name. By comparison, Costco only orders from them if they are the least expensive refinery.
This is why you rarely see name brand unattended stations. Branded stores make their money on the $1.99 overpriced bottle of coke, not through the gas. Even unattended, a branded station costs a lot more to use compared to a Costco fuel station.
It may also help that Costco doesn’t take all charge cards, and so save millions in card processing fees.
How come other gas stations charge a lot more than Costco? There is this misconception that Costco sells gasoline as a loss leader to draw in more members.
Yes, they wish to have more members, however the company does not deliberately lose cash at the gasoline 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 generally the spot market price, that is pretty competitive as to what other gas stations are paying for their inventory.
Depending on the location from the warehouse, they will usually comp shop 4 gasoline stations (branded and independent) in a certain radius from the warehouse. Every day, a staff member will drive around and obtain the costs from your 4 gasoline stations they comp shop on. The prices are applied for the AS400, and corporate gas department will call and tell the warehouse exactly how much the gas will sell for the day. A staff member just has to change the 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 service stations sell maybe 3 truckloads A WEEK. (Don’t think that neighborhood service stations 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 20-30-40 cents per gallon under the other service stations. And then there are other gasoline stations that are aggressive on the pricing, and Costco is not going to beat that price but just match it. The stations which can be aggressively pricing their fuel continue to have a good margin on their own product, to ensure that particular Costco will still be making money on each gallon of gas sold, albeit a smaller amount than 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 simply because they use their Costco charge card using a 4% rebate on gasoline.
The only real time 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 would be greater than the prior delivery earlier in the day. The neighborhood gasoline stations are still selling gas they bought 72 hours (even per week) ago, however we’re selling gasoline on the same price or just slightly lower compared to the 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 done many times a day to determine if another ewgoqq stations may have adjusted their prices. Costco may and definately will adjust their price in the center of the day to account for competitors’ price changes and to minimize losses.
Now, it functions inversely as well. Since the gas prices inside the wholesale market commence to drop, each subsequent load of gasoline is cheaper compared to the one received the day before or even earlier inside the day. Because the neighborhood gasoline stations still 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 gas station, just like one other “ancillary businesses” (pharmacy, food court, tire center, photo center, meat, bakery, optical, service deli) in the ware