1 teardown of the decisions behind Costco.
Costco runs its merchandise at almost no profit — and has since 1983. That looks like a discounting strategy. It isn't. It's a subscription business that uses cheap goods to protect a $5.3 billion membership fee line. Elara Hunt reads the decision underneath the low price: a written rule capping markup at 14% on outside brands and 15% on Kirkland, the renewal economics that make that rule rational, and why executive members — 47.7% of the base — drive 74.2% of sales. THE LEDGER: Costco moved the profit onto a line the customer renews on purpose, then spent the merchandise business defending that renewal.
