Build story · United States · 1983–2024
Costco: earning profit from memberships, not markups
Costco caps its markups, stocks only about 4,000 products, and earns a large share of its profit from annual membership fees renewed by about 90% of members.
By Shivam Bhandari · Reviewed 31 October 2026 · How we write
by the numbers
- Products stocked
- about 4,000
- Markup cap
- about 14% branded, 15% Kirkland
- US & Canada renewal rate
- around 90%
- Membership fee income (FY2023)
- about $4.6 billion
- Revenue (FY2023)
- about $242 billion
What happened
Jim Sinegal and Jeffrey Brotman opened the first Costco warehouse in Seattle in 1983, building on the Price Club model. The idea was simple: charge members an annual fee, then sell bulk goods at very thin margins in plain warehouses.
Costco limits markups to about 14% on branded goods and 15% on its Kirkland Signature private label, well below typical supermarkets. It carries only about 4,000 products, compared with tens of thousands in a big supermarket, which gives it enormous buying power per item and fast stock turnover. Its $1.50 hot dog and drink, unchanged in price since 1985, became a symbol of its value promise.
Membership fees — about $4.6 billion in fiscal 2023 — made up a large share of operating profit, while renewal rates in the US and Canada stayed around 90%. Costco's revenue reached about $242 billion in fiscal 2023.
Timeline
- 1983
First Costco warehouse opens.
- 1985
$1.50 hot dog combo introduced.
- 1993
Merger with Price Club.
- 1995
Kirkland Signature launched.
what made it work
- Membership fees fund low prices, creating loyalty.
- Limited range concentrates buying power.
- Strong private label with quality and value.
- Well-paid staff and low turnover.
the lesson
If customers pay you to belong, you can afford to give them unbeatable prices — and they'll keep renewing.
Apply it to your business
- 1Could a membership or subscription fund better prices?
- 2Fewer products can mean better deals and faster turnover.
- 3A symbolic, consistent price can define a brand.
Laws at work in this story
Figures are rounded and drawn from public reports, company filings and widely cited coverage at the time. Check the company's latest filings before relying on any number.