Higher gas prices drive members to Costco, which generally has the cheapest gas in most markets. “Clubs like Costco and BJ’s use gas as a ‘loss leader’ to attract new customers and get more foot traffic into their stores,” according to That’s the accepted logic for low gas…
ices — they drive in-store traffic, which the website further spelled out. “Why sell gas at a razor-thin margin? Because that helps get people in the door, and justifies the cost of their membership
Customers who notice the savings they receive on gas are more likely to venture into the warehouse for higher-margin goods, especially when economic sentiment is poor, and consumers are worried about stretching their dollars,” Investing.com added. That’s an accepted narrative, but it’s not actually what’s happening, because just like Costco makes a very low margin on gas sales, it also sells items in its warehouses at similar low margins. More gas sales don’t change Costco’s traffic Costco CFO Gary Millerchip shared how Costco’s record gas volume in the third quarter impacted its in-store traffic. “I would say that, generally speaking, a little less than half of our members are visiting the warehouse when they visit the gas station.
I would not say we have seen a dramatic change when you look at our results in the third quarter around traffic overall as a result of that. We think partly because a lot of members are increasing their frequency,” he said during the Q3 earnings call. Millerchip said that many members have visited more often to “top up” their tanks due to uncertainty over future prices.