How Costco Really Makes Money (The $65 Membership Trick)

How does Costco really make money? At first glance, the answer seems simple: Costco charges a membership fee and sells products. But that explanation misses the most important part of the business model. Costco keeps merchandise margins unusually low, uses enormous purchasing volumes to negotiate better economics, and relies on membership revenue, customer loyalty, high shopping frequency, large baskets, inventory turnover and recurring renewals to make the entire system work. In this video, we break down Costco's business model and explain: • Why Costco charges only a small annual membership fee • How the $65 membership changes customer behavior • Why Costco keeps product margins so low • How low prices make the membership more valuable • Why Executive Membership matters • How Costco uses purchasing volume to negotiate with suppliers • Why the limited product selection is actually an advantage • How the warehouse itself helps reduce costs • Why the famous $1.50 hot dog matters to Costco's brand • How inventory turnover and cash-flow timing strengthen the model • Why Costco's renewal rate is so important • How Costco's 2024 membership price increase tested the strength of the business model • Why Kirkland Signature is strategically important • What could cause the Costco flywheel to slow down • And why Costco is much more than a warehouse retailer The deeper you look, the more interesting Costco becomes. The products aren't really the final product. The final product is the belief that paying to shop at Costco is worth it. And once that belief remains strong, the entire system can keep turning. This video is for educational and informational purposes and is not financial advice. #Costco #BusinessModel #Business