How Costco Makes Money

Costco combines large-scale merchandise sales with recurring membership fees. The membership model strengthens recurring revenue and retention, while high sales volume, limited assortment, rapid inventory turnover, and efficient distribution support its low-cost operating structure.

Revenue Streams

• Merchandise sales are the primary revenue engine

• Membership fees provide recurring annual revenue

• Ancillary services such as gasoline, pharmacy, optical, tires, food court, and travel increase member utility and transaction frequency

• E-commerce and digitally enabled sales extend member access beyond warehouse visits

Membership Pricing

• Gold Star: $65/year

• Business: $65/year

• Executive: $130/year

Recurring Revenue
At Q3 FY2026, Costco reported:

• 82.9 million paid members

• 148.5 million cardholders

• 92.2% renewal rate in the U.S./Canada

• 89.7% worldwide renewal rate

Customer Acquisition
Costco does not publicly disclose a complete channel-by-channel acquisition funnel or customer acquisition cost. Supported growth drivers include new member sign-ups, new warehouse openings, digital membership promotions, comparable-sales growth, and e-commerce growth.

Customer Retention

• Annual paid membership creates a recurring customer relationship

• Consistent value supports renewals

• Executive rewards strengthen retention for higher-spending members

• Ancillary services create more reasons to use the membership

• Kirkland Signature provides exclusive value

Scalability
The model scales because new locations can reuse the same membership architecture, limited-assortment buying discipline, warehouse format, distribution practices, and operating standards.

Scale90 Takeaway
Recurring revenue works best when tied to clear ongoing customer value. Costco’s scalability comes from combining membership economics with simplified operations, repeatable systems, and strong retention.

Full Business Breakdown PDF: [Scale90 Business Breakdown.pdf]

Last Verified: September 2, 2026

Welcome to the Business Models channel inside the Scale90 Business Breakdowns section.

Every successful business is built on a model. A deliberate, intentional structure that determines how value is created, how customers are served, and how money flows in and out of the company.

Most entrepreneurs inherit their business model by accident. They start doing something, people pay them for it, and the model just sort of happens. The most successful founders design their business model on purpose and then optimize it relentlessly.

This channel breaks down how the best business models in the world are built, why they work, and what you can take from them and apply to your own company.

What you will find in this channel:

💰 Breakdowns of the most effective and proven business models across industries
🔄 Subscription and recurring revenue model analysis
📦 Product and service business model comparisons
🤝 Partnership, licensing, and franchise model breakdowns
🌐 Digital, e-commerce, and platform business model analysis
📈 How companies transition from one business model to a more scalable one
💼 Hybrid business model designs that combine multiple revenue streams
🎯 Business model innovation stories and what sparked the shift
🏗️ How to evaluate and improve your current business model
💡 Emerging business models being built on AI and automation

How to use this channel:

Every business model breakdown posted here ends with the same question, how does this apply to your business?

Study the models. Understand the mechanics. Then look at your own company with fresh eyes. Ask yourself whether your current business model is the right one for where you want to go or whether a shift, an addition, or a complete redesign could unlock a completely different level of growth and profitability.

The most profitable businesses are rarely the ones working the hardest. They are the ones built on the most intelligent models.

The right business model does not just make you money. It makes the right kind of money: predictably, scalably, and sustainably.

Study the models. Design yours with intention.

The Scale90 Team