How Costco Really Makes Money

How does Costco make money while keeping prices remarkably low? The answer reveals a business model built on high-volume sales, disciplined margins, and millions of recurring membership fees. In this Behind the Price business documentary, we break down Costco’s warehouse economics and examine how its strategy turns customer loyalty and scale into financial strength. You’ll learn how merchandise sales contribute to revenue, why membership fees matter to Costco’s profitability, and how membership accounting affects the company’s financial results. Using Costco’s fiscal 2026 results, we also explore membership fee increases and Executive rewards, while clarifying the difference between revenue, operating income, and net income. These distinctions offer a clearer picture of how Costco’s financial strategy works and why its membership model shapes the way customers shop. Watch to understand the economics behind one of America’s most recognizable retailers, then subscribe to Behind the Price for more business documentaries that explain how major companies make money. CHAPTERS 00:00 The Warehouse Model: Sales at Scale, Not High Markups 06:09 Membership Fees: Recurring Revenue, Spending Incentives, and Actual Profit SOURCES & REFERENCES Costco Wholesale Corporation Reports Fourth Quarter and Fiscal Year 2026 Operating Results — — Latest annual sales, fees, expenses, operating income, and net income figures. - https://investor.costco.com/news/news-deta... Costco Wholesale Corporation Investor Relations: Corporate Overview — — Company description of its low-price, high-volume, rapid-turnover warehouse strategy. - https://investor.costco.com/overview/defau... Costco Annual Report 2025 — — Membership-fee accounting, Executive rewards, deferred fees, and business descriptions. - https://s201.q4cdn.com/287523651/files/doc... Costco Wholesale Corporation Reports Fourth Quarter and Fiscal Year 2025 Operating Results — — Fiscal 2025 comparative results and membership-fee revenue. - https://investor.costco.com/news/news-deta... • The Good Jobs Strategy: How the Smartest Companies Invest in Employees to Lower Costs and Boost Profits — Zeynep Ton. Examines Costco’s low-cost operating model and workforce practices. • Retailing Management — Michael Levy, Barton A. Weitz, and Dhruv Grewal. Covers warehouse clubs, retail margins, inventory turnover, purchasing, and distribution economics.