Costco's nearly 100 million U.S. members pay for access to bulk goods at thin margins. The real profit comes from membership fees, which operate at essentially 100% margin, while the retail side runs near break-even to keep members coming back.
Costco is a really interesting model. They have almost 100 million people in the United States who are subscribed. So it's almost like they have a third of America. It's one of the most successful subscriptions ever. And so what's crazy is that a lot of people think that they're making their margin on selling you more product, but it's not that at all. It's that they can buy more products so that they can get volume discounts so that people then buy the membership to gain access to that scarce resource. Having unique products in super high volume with the lowest cost where people gain access to it, and the access is 100% margin. So if you think about that, like the actual membership itself is just to have the privilege of shopping at Costco. And so they basically run the entire business as lean as possible and at essentially break-even because the model is that the membership is the money.
