Costco Gas Stations – Read Through This Article..

One thing to know is just 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 would really, sometimes, deliver fuel to 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 gas station excluding a 1-5% additive difference, and in most cases 1-2%. However the brand name stores must pay licensing and royalty fees to the brand name they operate under. Even the brand name stores also must buy a certain % of gas from refineries properties of the brand name. In comparison, Costco only orders from them if they are the cheapest refinery.

For this reason you almost never see name brand 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 a lot more to operate than a Costco fuel station.

It may also help that Costco doesn’t take all credit cards, and thus save millions in card processing fees.

How come other gasoline stations charge a lot 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, however the company will not deliberately lose money on the service 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 price is generally the spot market price, that is pretty competitive from what other service stations are investing in their inventory.

Depending on the location in the warehouse, they will usually comp shop 4 service stations (branded and independent) within a certain radius of the warehouse. Each morning, a staff member will drive around and obtain the costs through the 4 service stations they comp shop on. The prices are put 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 price on the sign to mirror that prices which can be 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 Every Week. (Don’t believe that neighborhood service stations do not make money selling gasoline) Depending on the area, you may have branded service stations that keep their price high, so Costco will surely earn money on each gallon of gas even if they’re selling gas for 20-30-40 cents per gallon less than the other gas stations. And then there are other gasoline stations that are aggressive on the pricing, and Costco will not beat that price but just match it. The stations which can be aggressively pricing their fuel still have a good margin on their own product, so that particular Costco is still making profits on each gallon of gas sold, albeit a lesser amount than a Costco location with competing service stations which are not as aggressive on their pricing. A lot of the neighborhood service stations that aggressively price their fuel do not take charge cards. For that typical Costco member, the gasoline continues to be cheaper at Costco since they use their Costco credit card having a 4% rebate on gasoline.

The only time which i have encountered where we deliberately needed to sell gasoline at a loss was during sudden spikes in gas prices. Since Costco turn their fuel inventory so quickly, each new delivery on the same day could be more than the previous delivery earlier inside the day. The neighborhood service stations remain selling gas they bought 72 hours (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 in a higher acquisition cost. During the times during price volatility, comp shops of competing neighborhood gas stations may be performed many times a day to determine if another ewgoqq stations may have adjusted their prices. Costco may and will adjust their price in the center of the day to account for competitors’ price changes and to minimize losses.

Now, it functions inversely as well. Because the gas prices within the wholesale market begin to drop, each subsequent load of gasoline costs less compared to one received the day before or even earlier in the day. Because the neighborhood gasoline stations still have gas that they bought 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 gas station, just like another “ancillary businesses” (pharmacy, food court, tire center, photo center, meat, bakery, optical, service deli) within the ware

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