One thing to comprehend is how 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 Station Hours and then check out 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 identical to at a brand name gas 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 should also buy a certain % of gas from refineries owned by the brand name. In contrast, 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 cash on the $1.99 overpriced bottle of coke, not through the gas. Even unattended, a branded station costs far more to use than a Costco fuel station.
It can also help that Costco doesn’t take all charge cards, and therefore 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 being a loss leader to draw in more members.
Yes, they would like to attract more members, however the company does not deliberately generate losses on 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 cost is generally the spot market price, which can be pretty competitive from what other gasoline stations are spending money on their inventory.
Depending on the location of the warehouse, they will usually comp shop 4 service stations (branded and independent) in a certain radius in the warehouse. Each morning, an employee will drive around and obtain the values from the 4 gasoline stations they comp shop on. The costs are entered into the AS400, and corporate gas department will call and tell the warehouse how much the gas will sell for your day. A worker just must change the price on the sign to mirror that prices that 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 Per Week. (Don’t believe that neighborhood service stations tend not to make any money selling gasoline) Depending on the area, you may have branded gas stations that keep their price high, so Costco will certainly generate income on each gallon of gas even if they’re selling gas for 20-30-40 cents per gallon under the other gasoline 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 that are aggressively pricing their fuel continue to have a decent margin on their product, to ensure that particular Costco is still making profits on each gallon of gas sold, albeit a smaller amount than a Costco location with competing service stations that are not as aggressive on their own pricing. The majority of the neighborhood gasoline stations that aggressively price their fuel tend not to take charge cards. For the typical Costco member, the gasoline continues to be cheaper at Costco since they use their Costco credit card using a 4% rebate on gasoline.
The sole time which i have encountered where we deliberately needed 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 will be more than the prior delivery earlier within the day. The area gas stations remain selling gas they bought 3 days (even a week) ago, but now we’re selling gasoline in the same price or just slightly lower than the neighborhood gas station is selling but in a higher acquisition cost. Throughout the times during the price volatility, comp shops of competing neighborhood gasoline stations may be completed repeatedly a day to find out 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 also to minimize losses.
Now, it functions inversely as well. Since the gas prices in the wholesale market begin to drop, each subsequent load of gasoline is cheaper than the one received the day before or even earlier inside the day. Since the neighborhood gasoline stations continue to have gas they bought at a higher 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 another “ancillary businesses” (pharmacy, food court, tire center, photo center, meat, bakery, optical, service deli) in the ware