How Amazon, Costco, and Alphabet really make their money
fool.com
fool.com
the article says it got 3.1 billion in fees, and only 51,600 members (which seems really low). that means each member on average paid around $60,078 in yearly fees? that doesn't seem right?
maybe they meant 51,600,000 members, which then works out to the more reasonable $60.08 in fees?
The numbers appear to have come from:
http://phx.corporate-ir.net/phoenix.zhtml?c=83830&p=irol-SEC...
Which states 51,600 as the number of card holders, with the 'in thousands' obviously missed by the article writer.
According to this, if you separate Costco's business into the purely discount retail sales part, and membership fees, the former runs at a modest loss, the company makes its money on the fees. Which the article claims are reliable, with a 90% renewal rate, and are fairly price inelastic, with last years rise resulting in minimal losses.
It's concisely relates the figures for all of this, they're quite interesting. E.g. AWS $26 billion in 2018 sales, $7 billion in operating income. Emphasis since I'm pretty sure most of that money is going to growing the service.
But this is at least a bit misleading, because in the separation all the costs of running the business, plus the cost of goods sold, is counted on the retail side, and the memberships are treated as just freestanding revenue. Part of the cost of running the business is associated with memberships.
On the other hand, it is a useful and probably necessary way to view Costco, as their renewal numbers possibly change over time.