One thing to know 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 gas stations. The same truck will actually, in some instances, deliver fuel to Costco Gas Hours Today and then go to 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 like at a brand name service station excluding a 1-5% additive difference, and often 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 belonging to the brand name. In contrast, Costco only orders from them if they are the cheapest refinery.
This is why you hardly ever see brand name 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 a lot more to operate 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.
So 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 bring in more members.
Yes, they would like to have more members, but the company does not deliberately generate losses on the gasoline 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 particular Kirkland Signature fuel additive. The purchase price is often the spot selling price, that is pretty competitive as to what other gasoline stations are paying for their inventory.
Depending on the location in the warehouse, they will likely usually comp shop 4 gasoline stations (branded and independent) inside a certain radius of the warehouse. Every day, an employee will drive around and get the costs through the 4 gasoline stations they comp shop on. The prices are put into the AS400, and corporate gas department will call and tell the warehouse just how much the gas will sell for your day. A staff member just needs to change the price on the sign to reflect that prices which can be downloaded right 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 gas stations do not make 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 25-30-40 cents per gallon lower than one other gasoline stations. And then there are other service stations that are aggressive on their pricing, and Costco will never beat that price but just match it. The stations which can be aggressively pricing their fuel have a decent margin on their own product, so that particular Costco is still earning money on each gallon of gas sold, albeit a smaller amount compared to a Costco location with competing service stations that are not as aggressive on the pricing. Most of the neighborhood gas stations that aggressively price their fuel tend not to take charge cards. For the typical Costco member, the gasoline remains cheaper at Costco since they use their Costco credit card with 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 could be higher than the previous delivery earlier inside the day. The neighborhood gas stations remain selling gas they bought three days (even a week) ago, but now we’re selling gasoline at the same price or just slightly lower than the neighborhood service station is selling but in a higher acquisition cost. Through the times of price volatility, comp shops of competing neighborhood service stations may be completed several 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 midst of the day to take into account competitors’ price changes and also to minimize losses.
Now, it works inversely as well. Because the gas prices within the wholesale market commence to drop, each subsequent load of gasoline is less expensive compared to one received the day before or even earlier within the day. Considering that the neighborhood gas stations continue to 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 another “ancillary businesses” (pharmacy, food court, tire center, photo center, meat, bakery, optical, service deli) inside the ware