Costco loses money on gas on purpose. Here is the strategy.

THAT is the entire strategy.

Across 747 stations, Costco makes a few cents per gallon. Regular gas stations make 25 to 35 cents. Lines wrap around their parking lots. They are calling tanker trucks multiple times a day to keep up. And the company is thrilled.

Here is why.

Costco is not in the gas business. They are in the membership business.

About half of every customer who pumps gas walks into the warehouse. Foot traffic is up 5%. The members who use gas spend more inside. And membership fees, the boring annual renewal that nobody talks about, account for two-thirds of Costco's entire profit.

Gas is the bait. The warehouse is the conversion. Membership is the profit.

It is not just gas. The $4.99 rotisserie chicken sits at the back of the store. You walk past the entire aisle to get there. Costco loses a little on the chicken, you walk out with $80 of groceries. Nothing in Costco is accidental.

Now look at most B2B companies. The founder picks one product, prices it for margin, pushes it hard, and hopes growth happens. There is no bait. There is no path. There is no profit product behind the visible product.

I walk into companies all the time where the founder cannot tell me which product actually pays the rent. They have a thing they sell. They have customers. The numbers are okay. But ask "which product brings the right customer in, and which one keeps them," and the room goes quiet.

The lesson from Costco is not "lower your prices." Plenty of companies lose money on cheap products and never recover it.

The lesson is that the visible product is not always the business.

What customers buy first is not always what makes you the money. What you advertise is not always what they pay you for over the next ten years. Costco knows the difference, by line item, by foot traffic, by aisle.

Most founders do not.

Figure out what your "gas" is, what your "warehouse" is, and what your "membership" is. If those three things are the same product, you do not have a business model. You have a single transaction repeated until you run out of customers.