How Costco makes money

Costco is really two businesses. One is a store: it buys goods and sells them to members. Of every $100example (example number: Simplified example: a round amount of shopping, to show Costco's averages.) members spend, Costco pays $88.91 for the goods and $9.15 to run the warehouses, and keeps about $1.94sec.gov ·2026.

The other is the membership. Costco had 84.1 million paid members at the end of fiscal 2026, and their fees came to $5.9Bsec.gov ·2026. That's only 1.95% of all the money coming in, but it's about half of the $11.7Bsec.gov ·2026 Costco made from running the business.

Costco doesn't split its running costs between the store and the memberships, so the fair way to say it is that the fees are equal to about half of the operating profit.

Gross margin is what's left of each sale after paying for the goods. The supermarkets and big-box stores below keep 22.9%sec.gov ·2025 to 27.9%sec.gov ·2025; warehouse clubs keep less than half of that, so their prices can sit well below.

To live on that, Costco keeps its costs low. Its report says it carries fewer than 4,000sec.gov ·2026 items per warehouse, mostly fast-selling models and sizes, displays them on pallets so restocking takes less work, keeps its warehouses plain, and opens for shorter hours than many other retailers. It also often sells goods before it has to pay for them: at the end of fiscal 2026 it owed suppliers $22.6B while holding $19.3Bsec.gov ·2026 of stock.

The whole plan works only if members come back each year. In the US and Canada, 92.3%sec.gov ·2026 renewed at the end of fiscal 2026.

The best customers pay more. Executive members, who pay the higher fee, were 42.3 million of the 84.1 million paid members, and they bought 75.2%sec.gov ·2026 of everything Costco sold.

Costco raises its fee rarely and by a little: by $5sec.gov ·2017 in 2017, and again in September 2024, when the basic US and Canada fee went from $60 to $65sec.gov ·2024 a year. Fee money grew 11%sec.gov ·2026 in fiscal 2026.