Costco

Today

Costco is one of the largest retailers in the world. As of early 2026, the company has over 900 stores (“warehouses”), 340,000 employees, 90 million members, and roughly $270 billion in annual sales.

The company’s net income (profit) is about $8B, of which over $5B (~2/3) comes from membership fees.

It is perhaps the largest example of a company preserving nourishment at scale.

How It Started

While Jim Sinegal and Jeff Brotman opened the first branded Costco outside Seattle in 1983, the company’s origins date back to 1954, when Sol Price founded FedMart as one of the first retailers to sell both food and general merchandise.

Deeply community-minded and wary of the impact of middlemen, Price had been inspired by a members-only government cooperative where federal workers pooled buying power for better prices.

Price’s core innovation was his explicit prioritization: customers first, employees second, stockholders third. This order led him to the membership model.

Elevating anything outside shareholder return seems absurd today, but Price viewed his duty to represent the customer, not to sell to them. He also paid employees well above market rate and, when large brands refused to sell to him, created his own labels to reduce their leverage (the inspiration for Costco’s famous Kirkland lines).

In 1976, after selling FedMart, he opened Price Club, which extended the wholesale model first to businesses, then to a broad consumer base.

Costco co-founder Jim Sinegal, who started as a bagger under Sol at 18, famously said that he didn’t learn a lot from Sol — he learned everything. In 1993, Costco merged with Price Club, reconnecting mentor and mentee.

Product Structure

What is Costco’s product?

The obvious answer — the stuff on the shelves — is incomplete at best. Even the company’s own Kirkland brands contribute to its product, but are not the full product themselves.

Costco’s product is, at its core, a way of buying that prioritizes the customer.

Because this product is inherently nourishing (notwithstanding the impact of global supply chains and reactive consumerism), Costco is structurally protected against reactive economics in a way few large public companies are.

They make money not when the customer buys more, but when the experience of buying is itself better.

Indirectly, this product also creates community.

Governance & Financial Structure

Costco’s product is preserved directly through its financial and governance structure.

1. Capped mark-ups: Costco makes about a 1% profit on all store sales, with 15% limits on mark-ups (compared to typical 25%-50% in retail).
2. Profit through membership: Costco makes ~2/3 of its operating profit on memberships, despite these accounting for less than 2% of its total revenue.
3. Above-market compensation: Hourly employees average $30/hr, with strong benefits. Turnover is ~6%, vs. national retail average of 60%+. Internal promotions are prioritized as well.
4. Public commitments: For instance, the famous $1.50 hot dog. Efforts to extract more value are comparatively visible and violate customer trust.

Costco, one of the 25 most valuable companies in the world, has both a philosophical and structural commitment to enough. Violating this commitment directly hurts their core product. This structural fact preserves nourishment even in the face of a street that cheers or penalizes small deviations in quarterly profit.

Looking Forward

Because nourishment is its actual core product, Costco seems relatively well-protected against reactive drift.

Perhaps the bigger question is if other companies can replicate success under structures that explicitly prioritize customer nourishment as the north star, then allow the financial chips to fall where they may.