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.
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).
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.
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 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.
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.
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’ve been noticing that, and buying less at Costco recently too.
A box of fish, cod, used to be 11.99 before covid… Now? 16.99, 15.99 on sale.
Fucking insane.
But doesn’t it cost Costco more to acquire that stuff in the first place? You can’t just say that the price is higher so Costco is making higher profits unless you compare the cost of goods to what they were before too. According to the data I could find, Costco’s profit margin’s are lower than they were before. Their total profits from last year, for example, were only higher because they sold more memberships. They actually made less in profit from the products despite the fact that the products cost more this year.
