How Costco Makes Money: Just 2 Cents Selling You Things

Costco sells about $297 billion of goods a year, yet it keeps only about 2 cents of every dollar before tax. So how does it make billions? This is the story of Sol Price and FedMart, the student who built Costco, the $1.50 hot dog, the $4.99 chicken, fewer than 4,000 products, higher pay, the card scanners at the door, Asia, and why there is no Costco in India. So does Costco really make almost nothing selling you things? 0:00 The $1.50 promise 0:57 The teacher: Sol Price 1:55 The student: Jim Sinegal 2:58 The secret math 4:06 The card is the product 5:25 Less is more 6:29 The loss leaders 7:31 Paying people more 8:23 The cracks 9:32 Asia, and why not India 10:28 The verdict New business stories every week. Subscribe: https://www.youtube.com/@thebilliondo... Related: BlackBerry Sold Half of US Smartphones. Then It Vanished:    • What Happened to BlackBerry? It Sold Half ...   Sources: Costco's numbers: Costco FY2026 results release (24 Sep 2026) and Form 10-K; StockTitan; Pulse 2.0; Motley Fool and GuruFocus (Q4 2026 call); Costco FY2025 and FY2019 Form 10-K (SEC); Costco FY2019 results release Origins: AP via The Philadelphia Inquirer and Supermarket News (Sol Price, 2009); Fox Business (2024); HistoryLink.org; The Seattle Times (1997); Legacy.com and University of Washington Magazine (Jeff Brotman) The card: TODAY via NBC New York and Axios (2024 fee rise); CNN via ABC7, ABC7 Los Angeles and Supermarket News (card scanners) Fewer products and Kirkland: The Motley Fool (2015); Consumer Reports (2021); Fortune (2024); Grocery Dive (2025); Chowhound (2026) Loss leaders: Fox Business, CNN via ABC7 and TODAY (hot dog); CNN via WTOP, Harvest Public Media via KUNC, Food Dive and NCC (chicken); Tasting Table, The Takeout and Chowhound (2025 volumes); CNBC via NBC Chicago and FOX Business (2024) Pay: FOX 13 Seattle and RetailWire (2025) Rivals: Amazon and Walmart annual reports; NBC New York and CNBC (Sam's Club fee, 2026) Asia and India: Supermarket News and The Globe and Mail (China, 2019); Fortune (2014); AmCham Taiwan (2018); KED Global (2024); Reuters via Yahoo Finance and Storyboard18 (India tech hub, 2025); Nishith Desai Associates (FDI rules); Moneylife and Reliance Industries (METRO India, 2022) Disputed points: The often repeated 14 percent (brands) and 15 percent (Kirkland) markup cap is not in Costco's filings; it traces to an analyst (2011) and trade press, so we call it unverified. "Fees are almost all the profit" was close to true around 2019 (about 71 percent of operating income) but is about half today. The Nebraska chicken project cost is reported as $300 million (2017) and $450 million (2019). The hot dog price is dated to 1985 by Fox Business and CNN and to "the 1980s" by TODAY. The "nearly $4.50 with inflation" figure is CNN's calculation. The cents-per-dollar figures are our own calculation from Costco's reports. This is a business history story, not financial advice. Photo and video credits (via Wikimedia Commons, edited: cropped, framed, graded): Public domain: US Department of Labor, The White House (video), USDA (video); CC BY 2.0: GoToVan, Matt Johnson, Ambrosia LaFluer, m01229, lazy fri13th, Tony Webster, JJBers; CC BY 3.0: Pretend Walker (video), Corey Coyle, Big Family Expedition (video), Dwight Burdette; CC BY 4.0: 888emmanuelc888, Canmenwalker, domdomegg (video), Lumery, 4084470 0.smil; CC BY-SA 2.0: brewbooks, Aaron F. Stone, Stacey Harris; CC BY-SA 3.0: BrokenSphere, Cullen328, Jason Zhang; CC BY-SA 4.0: Deans Charbal, Chris Light, Coolcaesar, Drumstick21, Rhododendrites, Costaricky, Alika113, Chasetheg, ZidaneHartono, ArnoldReinhold, Sikander, Sikander Iqbal, LERK, Mr.ちゅらさん, ウィ貴公子; CC0: 玄史生, Winnebaggo, Saimmx, Stevebidmead. Headline screenshots (CNN Wire via ABC7, Costco press release, FOX 13 Seattle, FOX Business via FOX 10, Fortune, HistoryLink.org, Nebraska Public Media via KUNC, TODAY via NBC New York) shown for news commentary. Full timestamped list in the comments. No AI images. Names and logos belong to their owners, shown for identification only. #costco #businessmodel #businessstory