> Revenue from membership fees accounts for the majority of the company's profits, accounting for over 72% of the company's net operating income in fiscal years 2022 and 2023, and 65.5% in fiscal year 2024.[115][a]
Comparing one revenue line to total net profit is a category error: the numerator and denominator measure different things.
In FY2024, Costco did $249.6B in net sales and collected $4.8B in membership fees. Gross margin on product sales was about $25B. That $25B is 5x the membership fee revenue. So, even if you consider membership fees as being free money, membership fees are only 16% of gross margin.
Moreover, without those product sales, the membership would be worth zero and no one would buy it.
In their 2025 filing, gross margin on merchandise was $30B, but SG&A cost $25B (with membership fees at $5.3B).
Note that $2.6B of those membership fees will go back to members as membership rewards, which is interesting too.
¯\_(ツ)_/¯
Feel free to click "edit" and fix it: that's kind of the whole point of Wikipedia. :)
It could also be similar insurance floats: premiums and claims generally even out, but they make their returns while they're holding people's money.
(Perhaps it's explained in their financial statements, but I've never been curious enough to check.)
Affiliations with providers of products like insurance, bottled water delivery, checks and the credit card are also sources of revenue.
But also remember regular members don't get cash back. The ratio is about 50/50. So about 40 million people pay for membership and don't get cash back.
That's not quite their policy - their explicit policy is "The Reward is not guaranteed to be equal to or greater than the Executive upgrade fee paid." - but they will refund you if you ask for it.
To justify the subscription I made the commitment to buy all my necessities there that I could, and in return I get back the equivalent of a month’s worth of free groceries.
The prices never really worked out in our favor and the experience of finding a cool product we did truly love only to find it not stocked the following month is awful.
It really makes me wonder how astroturfed the brand is.