
How Amazon, Costco, and Alphabet really make their money - hhs
https://www.fool.com/investing/2019/04/07/how-amazon-costco-and-alphabet-really-make-their-m.aspx
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smorks
am i missing something about costco?

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?

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NikkiA
Yes.

The numbers appear to have come from:

[http://phx.corporate-ir.net/phoenix.zhtml?c=83830&p=irol-
SEC...](http://phx.corporate-ir.net/phoenix.zhtml?c=83830&p=irol-
SECText&TEXT=aHR0cDovL2FwaS50ZW5rd2l6YXJkLmNvbS9maWxpbmcueG1sP2lwYWdlPTEyNTEzNjM1JkRTRVE9MCZTRVE9MCZTUURFU0M9U0VDVElPTl9FTlRJUkUmc3Vic2lkPTU3)

Which states 51,600 as the number of card holders, with the 'in thousands'
obviously missed by the article writer.

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dfrage
TL;DR: As you probably know, AWS has become Amazon's massive profit engine,
and Alphabet is an advertising company.

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.

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dragonwriter
> 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.

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.

~~~
dfrage
Exactly the point I was implicitly making. Trying to lump Costco's business
model into what Alphabet has always been, but not so visibly to most users,
and the goldmine Amazon stumbled upon, is more than a bit misleading.

On the other hand, it is a useful and probably necessary way to view Costco,
as their renewal numbers possibly change over time.

