[tiktir]

I doubt there is very little cost to memberships for Costco. So it has extremely high margins.

Since the products that are being sold in Costco are close to wholesale they also carry a margin, just not as high. So even if 100% of the memberships were used, they would still make a nice tidy profit. Purely because the products literally pay for themselves. This is primarily due to how Costco has low costs to having little need for additional warehouses outside of their public warehouses. Their cost of goods sold vs revenue is about 87%. So about 13% profit. That is just the goods themselves.

So the more I think about this, there has to be some sort of cost to memberships. Especially for people arriving, because if there was no cost, why implement these scanners? While memberships help with profit, there is a huge cost to implementing something that could scare your customers away.

I also think the whole "makes a majority of their money" needs further explanation. The highest percentage of their profit is from the membership fees. The highest percentage of revenue is from the goods sold is my bet.

[infecto]

Typically closer to 89-90%. Costco generally makes a 10% project. Merchandise is practically break even and memberships is where all the money is coming from. Merchandise and sga together is 98%.

Circling back to the insight that costco is designed to make profit from its memberships and not its merchandise, though they are certainly making margin off selling items as well. That's why they go through phases of cracking down on memberships.