One thing to comprehend is the way 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 would really, sometimes, deliver fuel to Costco Gast Station Hours and then check out 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 identical to at a brand name gas station excluding a 1-5% additive difference, and usually 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 invest in a certain % of gas from refineries belonging to the brand name. In comparison, Costco only orders from them if they’re the cheapest refinery.
For this reason you hardly ever see brand name 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 when compared to 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 service stations charge a lot more than Costco? There is certainly this misconception that Costco sells gasoline as being a loss leader to draw in more members.
Yes, they wish to have more members, but the company will not deliberately lose cash 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 own Kirkland Signature fuel additive. The purchase price is generally the spot selling price, which is pretty competitive to what other gas stations are investing in their inventory.
Depending on the location from the warehouse, they will usually comp shop 4 service stations (branded and independent) in a certain radius in the warehouse. Every morning, a worker will drive around and acquire the costs from your 4 gas stations they comp shop on. The prices are put into the AS400, and corporate gas department will call and tell the warehouse how much the gas will sell for the day. An employee just needs to 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 most of the surrounding gasoline stations sell maybe 3 truckloads A WEEK. (Don’t feel that neighborhood gasoline 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 another gas stations. And there are other service stations which are aggressive on their pricing, and Costco will not beat that price but just match it. The stations that are aggressively pricing their fuel continue to have a good margin on the product, in order that particular Costco is still making money on each gallon of gas sold, albeit a lesser amount when compared to a Costco location with competing gasoline stations that are not as aggressive on the pricing. A lot of the neighborhood service stations that aggressively price their fuel do not take charge cards. For the typical Costco member, the gasoline is still cheaper at Costco because they use their Costco credit card having a 4% rebate on gasoline.
The only time which 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 could be greater than the previous delivery earlier within the day. The area service stations remain selling gas they bought 3 days (even every week) ago, however we’re selling gasoline on the same price or just slightly lower compared to neighborhood gas station is selling but with a higher acquisition cost. Throughout the times during the price volatility, comp shops of competing neighborhood gas stations may be done several times a day to find out if the other ewgoqq stations may have adjusted their prices. Costco may and will adjust their price in the midst of the day to account for competitors’ price changes and to minimize losses.
Now, it works inversely as well. Since the gas prices in the wholesale market commence to drop, each subsequent load of gasoline costs less compared to one received the day before or even earlier within the day. Since the neighborhood gas stations have gas which they bought at a higher 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 gas station, just like one other “ancillary businesses” (pharmacy, food court, tire center, photo center, meat, bakery, optical, service deli) inside the ware