Opinion

Costco Fuels Its Growth

Costco in Canada has recently left the tobacco category in most stores and over the past year or two, has substantially reduced its confectionery products.  Good news for full-service wholesalers who seek route density for their trucks.

As a matter of interest and also pure controversy – Costco has been offering very attractive gas pricing – sometimes as much as 10 cents a litre lower than other gasoline retailers – bad news for margins – devastating news for independent petroleum retailers.

In this highly competitive retail landscape, Costco has a strong advantage over both (Walmart and Amazon) and that is their retailing of gasoline.  Costco is one of the largest sellers in North America and they continue to add pumps.  Sales of petroleum account for 10% of their total sales.  While everyone needs milk and bread to survive, the same can be said for gasoline (not a bad idea to sell something that most people need).

Costco’s recent financial reporting shows they continue to be far more profitable than Amazon even if the e-tailer is poised to surpass it in total annual sales. Costco is number two globally with Walmart being number one. Profits from merchandise and gasoline essentially cover their operating costs and their membership revenue falls to their bottom line (it is their profit).

While more and more retailers are fearing the growth of Amazon and their much anticipated delivery drones – Costco is well-positioned to grow their business on a different model.