One thing to understand is how the gas 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 cases, deliver fuel to Costco Gas Station Hours Of Operation and then go to a Chevron/Shell/Valero/etc and deliver fuel there. The only real 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%. However the brand name stores must pay licensing and royalty fees to the brand name they operate under. Also the brand name stores should also purchase a certain % of gas from refineries belonging to the brand name. In contrast, Costco only orders from them if they’re the most affordable refinery.
For this reason you almost never see brand name unattended stations. Branded stores make their money on the $1.99 overpriced bottle of coke, not from the gas. Even unattended, a branded station costs a lot more to operate than a Costco fuel station.
It may also help that Costco doesn’t take all charge cards, and so save millions in card processing fees.
Why do other gas stations charge so much more than Costco? There is certainly this misconception that Costco sells gasoline being a loss leader to draw in more members.
Yes, they wish to have more members, but the company does not deliberately lose cash on the gas stations. Costco buys their gasoline “off the rack” (Staying 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 own Kirkland Signature fuel additive. The price is usually the spot market price, that is pretty competitive to what other service stations are spending money on their inventory.
Depending on the location of the warehouse, they will likely usually comp shop 4 gasoline stations (branded and independent) inside a certain radius of the warehouse. Every morning, an employee will drive around and acquire the prices from your 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 has to change the purchase price on the sign to reflect that prices that are downloaded directly to the pumps.
The warehouses I worked at averaged 4 – 5 truckloads (approximately 8800 gallons each) per day, while the majority 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 service stations that keep their price high, so Costco will surely generate income on each gallon of gas even if they’re selling gas for 25-30-40 cents per gallon under one other gas stations. And there are other gasoline stations that are aggressive on their pricing, and Costco will never beat that price but just match it. The stations which are aggressively pricing their fuel continue to have a reliable margin on the product, so that particular Costco is still making profits on each gallon of gas sold, albeit a lesser amount when compared to a Costco location with competing gas stations that are not as aggressive on their pricing. The majority of the neighborhood gas stations that aggressively price their fuel tend not to take bank cards. For that typical Costco member, the gasoline is still cheaper at Costco since they use their Costco charge card using a 4% rebate on gasoline.
The sole 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 area gas stations remain selling gas they bought 3 days (even a 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. Throughout the times during price volatility, comp shops of competing neighborhood gas stations may be performed many times a day to find out if another ewgoqq stations may have adjusted their prices. Costco may and definately will adjust their price in the middle of the day to take into account competitors’ price changes and also to minimize losses.
Now, it really works inversely as well. As the gas prices within the wholesale market begin to drop, each subsequent load of gasoline is cheaper compared to one received the day before or even earlier within the day. Considering that the neighborhood gas stations 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 another “ancillary businesses” (pharmacy, food court, tire center, photo center, meat, bakery, optical, service deli) in the ware