[xingped]

I see you're not terribly familiar with Costco. Membership fees account for the vast majority of net operating income for Costco and they keep markups on items at no more than 14% over cost (15% for Kirkland brand).

So yes, Costco does make most of its profit by ensuring customers are happy and continue to renew their memberships every year.

[gruez]

>Membership fees account for the vast majority of net operating income for Costco

This is financially illiterate because you're mixing revenue ("membership fees") with profit ("net operating income"). While it might be tempting to assume that membership fees is pure profit for them, it's not, because people only buy memberships because they're useful for something (ie. shopping at their stores). Therefore you can't strip that out from the other costs associated with operating a chain of warehouses.

[devilbunny]

It’s kind of a meme; Costco’s profits are almost exactly the same as their total revenue from membership fees, which leads people to think that the warehouses run at zero margin and the fees are their only profit source. The fees certainly give them room to run the sales at extremely low margins (though large grocers like Kroger only have something like 3% margins), but it wouldn’t take a huge shift in purchasing patterns to change this coincidence. If all the people who don’t use their membership that much dropped them and those who use them were all large-scale buyers, they would have to increase their prices just to give themselves a bit of cushion.

[s1artibartfast]

It seems to amount to a similar principle, that their business model depends on repeat customers, and would fail if they lost trust.

I much prefer this to stores that are happy to burn customers, never expecting to see them again.

[xingped]

Oh gee aren't you cute. Costco's entire cost of doing business are covered purely by their sale of goods. The memberships are pure icing on the cake. It's not wrong to look at it this way.