I was suspicious of this claim so I investigated the data from Costco’s public statements for the 12-week period ending 18th February 2024.
Revenue from merchandise sales was $57.33 bn while their cost was $51.14 bn. Selling and administrative costs (i.e. worker salaries, facilities, &c.) was $5.24 bn. The total costs add up to $56.38 bn, meaning their profit on merchandise sales was $0.95 bn, or 1.6%. This is unchanged compared to the 12-week period ending 18th February 2023 (last year).
Based on the data, I find the claim that Costco is participating in greedflation questionable when their profit margin hasn’t at all increased from last year.
Rather, the growth on their bottom line appears attributable to (1) an increased volume in sales and (2) an increase in membership fees. Sales volume increased from $54.24 bn in 2023 to $57.33 in 2024. Hence the same 1.6% represents the same slice of a larger pie, resulting in greater profit in absolute terms. Additionally, revenue from membership fees increased from $1.02 bn to $1.11 bn (up 8.8%). Membership fees are basically 100% profit for Costco and it makes up most of their net revenue.
Based on this data, I do not agree with the article’s conclusion at all.
The data is available here
In the interest of disclosure: I own a very small amount of Costco stock (less than half a share).
Yeah, was gonna say, this doesn’t make sense given their business model.
That said, it does feel like they have changed their offerings to more expensive options lately. That, plus supplier price increases, could explain the sentiment.
They are still the most cost effective on the vast majority of their products when compared to other stores.
Costco uses cost-plus pricing and caps its markup at 14% for outside brands and 15% for in-house brands (Kirkland). Other stores that use “value based pricing” are seeing some stuff marked up 600%. I only shop Costco a few times a year, but they are not where we need to focus on price gouging.
A new analysis from Accountable.US found that Costco reported consistently high profits while raising store prices
So…just like the rest of corporate America?
“lookie here! hot dog combo is still a buck fifty! we’re the good guys, honest!”
//raises prices everywhere else//
(they’re still priced above cost btw. hot dogs are cheap, especially when you own the factory. fountain syrup per serving is also inexpensive, and they no-doubt have a sweetheart deal from pepsico to keep them loyal)
Even with some or most prices increased, Costco is still one of the best places to shop for a ton of reasons that any member can fill you in on.
It’s clear that plenty of people don’t understand how this shit works in real life. Did no one here see Costcos official response to a couple of stores voting to unionize?
I am not one to praise any retail whatsoever but I preach the holy site that is Costco to anyone that will listen. Even the single people out there can benefit, if you wear prescription glasses and/or have any meds you need on a regular basis, those alone could save you at least the first years membership.
Costco began, and allegedly is still, a bulk buying savings membership warehouse. But the transition to mostly “organic” foods that are double the price or more of their non “organic” labeled products is just greed. Frozen blueberries 3lbs $9.00, sams non organic 4lbs less than $9.00. White mushrooms $5.99, sams $3.49, same size. And “organic” fresh produce dies faster than regular. My store got rid of the bag of spinach, $4.99 2.5lbs and only has the bin 1lb for $3.99, that would be $10.00 for the same product, Just a few small examples.
On the other hand, buying Sam’s means supporting Walmart and the Walton family, so it’s up to you how much that affects your calculus.
If you or anyone is doing all of their shopping at one at store, that’s a you problem. Despite how okay we are doing, we still shop around for deals and take advantage of things like teeter doing multiplied points on Fridays towards gas discounts, checking out Aldi and Lidl for deals, etc.
Costco does not have a large variety or selection of what they offer but most things are pretty much guaranteed to be a better deal than elsewhere. For example, because of vpx having issues I’ve settled on Celsius as my current caffeine+other stuff drink when I am working or otherwise need the boost. Amazon and elsewhere sell 12 packs for like $19-$25+, Costco has the same pricing (approximately) but it’s 18 cans instead of 12. Another example is a greenworks riding lawnmower I’ve been eyeballing as soon as I can find the 6k+, bb has it for about the same price or even cheaper when it’s on sale but Costco includes $2400+ worth of extras like twice the batteries and the not cheap clippings bag for the back of it for the same price.
Long story short. Take advantage of what Costco has to offer and do what you have to do to save a buck. Don’t just assume that it’s a better deal because reasons but I’ve learned that for a lot of things, Costco is going to be a better deal even if it’s priced slightly higher or same.
Oh and anyone reading this. Stop buying most of your meat and produce at regular stores like Costco, teeter, publix, etc. Find one or 3+ local farms that sell directly to the public, also keep an eye out for what are called CSAs, you prepay an amount upfront in late winter, early spring and then you get a set number of weekly pickups that are based on what you want and what they have fresh and ready to go. The ones we have worked with are usually open to swapping things out if you end up with more of one thing than you would like but that is based on what they have available for a swap. There is also a local one that we hit up every so often for farm fresh milk that is so much better than any store bought of any brand.
The hot dog being $1.50 is still good considering that they could probably double the price, which would triple or quadruple their profit on it and people would still happily buy.
Of course, it’s not because of altruism that they do it. They do it because people use the hot dog as a symbol of the good value for money that Costco supposedly provides.
Costco CEO Ron Vachris further suggested a [membership] price increase would actually benefit both the company and consumers, during an earnings call on May 30. An increase would award Costco additional revenue that could allow the company to lower store prices and help customers save money over time, Vachris said.
“Could allow” hmmm…
Also maybe those current huge profits “could allow”? Oh no… So just no intention of any of this in reality, huh? Okay.
Hypothetically say the price of membership goes up 20% and they put all of that back into keeping prices on goods lower.
It would benefit big families and people who shop there more than people who dont. Keeping the whales happy is more important than the guy who just likes cheap rotisserie chickens and hot dogs.
Would it? Their profit margin on goods is minuscule. Their profit margin on memberships is (practically) infinite. Losing subscribers could cost them big on their money printing department, and may not end up having the benefit they’re after.
It could very well backfire, just saying that “putting membership price up to save you money” sounds like bullshit but in the context of retaining people who spend thousands a month at the cost of (potentially) the people who barely use their memberships and spend very little does make some sense.
I’m just not sure you seriously believe that there’s any chance they “put all of that back into keeping prices on goods lower”. That’s not the reality we live in.
If anything, maybe they will discount shrimp by $1 for thirty days for a headline (and then of course they’ll quietly raise the price of blueberries by $1.50 for the rest of that year).
They won’t just not profit when they can and they won’t not “get revenge” on the consumer for saving.
Its all hypothetical but remember they have literally unlimited access to our analytics including name and age and we pay them for the privilege.
If their marketing and research people have concluded that if they up membership $10 annually from 130,000,000 members, lose 1000000 people who have decided that the price hike is just too much, take the 1.2 Billion in extra funds and pump it back into making bread, milk and eggs significantly cheaper to get more people doing their weekly shop there that they will make 2.9 billion more on impulse purchasing they will do that.
Corporations gonna corporation, its on consumers to not be dumb fucks.
All inflation is “greedflation”. It’s the result of millions of people trying to figure out exactly how much money they can fuck you out of, down to the cent.
