How does Costco make money?
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The Secret: Where does a large share of Costco's profit come from?
Membership fees. Costco keeps markups low and earns a large part of its operating income from membership fees, so cheap prices drive renewals that drive profit. Source: Costco 10-K (membership fees)
Why They Stay: Why do members renew at very high rates?
They want to 'earn back' the fee by shopping more. The upfront fee works like a sunk cost: members consolidate shopping to justify it, which further raises the value they see. Source: Costco investor relations – renewal rates
Why They Leave: Who gets the least out of a warehouse-club membership?
Small households who can't use bulk sizes. A membership only pays if your savings beat the fee. Small households struggle to use bulk perishables before they spoil, so the math often doesn't work for them. Source: NerdWallet – Costco membership cost and benefits: is it worth it?