Why are prices in stores like Costco and Sam’s Club much cheaper than your average grocery store?

Question

Why are prices in stores like Costco and Sam’s Club much cheaper than your average grocery store?

In: 226

Answer 1

Many good answers but I don’t think any of them covered a key piece.

Let’s talk specifically Costco, I am not too familiar with Sam’s club.

Costco makes almost all of its profits from membership. They have a fixed margin (14٪ I think) as all other costs, that comes from products. If they buy it for $100, they sell it for $114, at most. This covers their operating cost. The $60 or $120 they get from membership is the pure profit.

They also sell so many of the products that a penny on each still generates enough to cover the operating cost.