As a subscription supermarket with everyday essentials at wholesale prices, the Costco net worth is surprisingly high.
Costco is a member-only retail store that has capped the profit margin on all of their products at 15%, while continuing to pay their employees an industry high wage.
It hardly seems like a smart business model. Yet, Costco ranks as the world’s second largest retailer.
The company relies on an annual subscription fee to generate profit. This fee provides customers with access to their range of low cost products.
While savings vary from product to product, some items were found to be as much as 40% cheaper than supermarket prices. If used regularly, the savings make the £28 membership fee worthwhile.
Costco provides shoppers with a range of items. While they tend to focus on essentials, such as food and hygiene products, they also stock less common products, such as electronics and furniture. Yet, despite the high value of these items, they aren’t what keep the Costco net worth up.
3 best-sellers that Costco shoppers can’t resist
Part of the Costco business strategy is to use low or non-profit items to pull shoppers in, before convincing them to purchase other items while they’re there.
The hot dog and drink combo (priced at £1.50) is the perfect example. The price has been kept the same for over 20 years, but rising costs mean that they make little in return. Yet, Costco hot dogs currently sells at a rate of more than 100 million per year, making up for the low markup.
The discount supermarket sells a total of 60 million chickens each year, bringing in more than $300 million in revenue. However, as poultry costs continue to rise, Costco have opted to keep prices low, meaning that very little profit is made on chicken sales.
The bathroom essential is the company’s most popular product, with more than one billion rolls sold each year. This brings in more than $400 million in revenue. Toilet paper is at the centre of Costco’s business strategy. In fact, the company even has a team of toilet roll technicians, tasked with testing and maintaining the product’s quality.
Costco net worth: Low profit, but high volume
Despite their unusual business strategy and low prices, Costco manages to generate more than $100 billion in annual revenue. That puts them level with the likes of online retailer Amazon and ahead of UK supermarket chain Tesco.
While Costco’s revenue figures are far below that of retail giant Walmart, the high volume of sales made by the discount store generates plenty of interest from investors.
As a result, Costco’s market cap currently stands at $75.7 billion.