Costco’s biggest member draw isn’t its groceries or food court. It’s the gas.
In its Q3 earnings call, leadership made that clear. The company consistently prices fuel below local competitors. As gas prices climbed amid geopolitical tensions, Costco pumps became a major traffic driver for members looking to save at the pump.
“Gas prices are very much on members’ minds,” said Gary Millerchip, Costco’s executive vice president and CFO. “They have had a major impact on our overall growth in gas and have also, for sure, become a bigger percentage of a member’s total spend in the month.”
The gas itself isn’t a big profit center. Margins are thin by design. The real value is what it does to member behavior.
Cheap gas gets you through the door more often
Members who buy Costco gas visit the warehouse more frequently, spend more overall, and renew their memberships at higher rates, Millerchip said. A little under half of those who fill up also go inside.
This is a classic loss-leader strategy. Costco has used it before—most famously with its rotisserie chickens, which have stayed at roughly the same low price for more than 25 years. The chickens are placed deep in the store so shoppers walk past higher-margin items to reach them. Cheap gas works the same way: it draws people in, increases visit frequency, and justifies the annual membership fee (as high as $130).
The company wins even when the gas sale itself barely breaks even.
How to protect your wallet
If cheap gas regularly leads to unplanned spending inside the warehouse, the simplest fix is the most effective: treat the pump as a gas station, not a shopping trip. Fill up and leave unless the warehouse was already on your planned shopping list.
When you do go inside:
- Make a list before you arrive and stick to it.
- Set a firm budget for the visit.
- Shop with someone who will help keep you accountable.
- Watch for other loss leaders. If a deal seems unusually good, ask what the retailer gains by offering it.
One exception: Costco’s first standalone gas station, which opened in Mission Viejo, California, in June. With no warehouse attached, the temptation to overspend disappears.
Costco did not immediately respond to a request for comment.