Business Models Explained with Fexingo · 2026-08-10 · 9 min
Costco's business model is often misunderstood: it barely makes money on the stuff it sells, yet it's one of the most profitable retailers in the world. In this episode, Lucas and Luna unpack the genius of Costco's membership-first model, where annual fees - not product markups - drive the bottom line. They break down how Costco's famously low prices are possible because the company's real product is the membership itself. With numbers like 4.5 percent gross margins versus a typical supermarket's 25 percent, they explain how Costco uses its membership overage to fund growth, keep prices low, and build a loyal customer base that renews at 90 percent. They also explore the limits of the model: why Costco can't open in every market, how it handles inflation and competition, and what other businesses can learn from a model that prioritizes the relationship over the transaction. Whether you're a business owner or a curious shopper, this episode reveals the hidden economics behind your warehouse club membership.
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