If you’ve driven past a Costco gas station lately, you’ve likely seen a line wrapping halfway through the parking lot. With rising fuel prices and global energy concerns squeezing wallets, drivers are hunting for savings anywhere they can find them – and Costco’s 10-to-30-cent discount per gallon is winning the day. According to Costco’s latest earnings report, this price sensitivity drove record-breaking fuel volumes, pushing tons of members to use their pumps for the first time.
The extra savings make a nice bonus when gas prices are relatively low, but when prices climb, they feel essential. As explained by CEO Ron Vachris, the company is hyper-focused on maintaining value for members during a period when many customers are feeling the pinch.
The strategy for Costco is bigger than gas
Costco can keep its gas prices low and accept thinner margins because it is not trying to make huge profits from fuel or dominate the fuel business. The actual goal is getting people to stop at the business for gas. Once they are on the property, there is a good chance that many will end up walking into the warehouse.
Just like that, filling up the tank turns into a rotisserie chicken run, a cleaning supplies purchase, an impulse snack haul, or even a cart full of things nobody planned to buy.
This strategy has results to boast of, as Costco’s gas pumps are not the only place seeing more traffic. The company reported 11.6% growth in net sales, 21% growth in digital sales, 37% more traffic to its website and apps, and 4.1% growth in paid memberships.
Other strong-performing categories included pharmacy, gold and jewelry, tires, home furnishings, and housewares.
Costco is trying to speed things up
Anyone who has visited Costco on a weekend knows the checkout lines can feel like their own endurance sport. To address that, the retailer has been testing new technology that allows employees to pre-scan items while shoppers wait in line.
Those customers can then move to dedicated payment stations, helping reduce checkout times.
According to the company, it is now expanding the program to more locations. So, you can expect a thinner checkout line at the Costco next to you soon.
Source: Inc.