How Costco became the king of bulk buying, starting out by selling only to businesses out of an old airplane hangar

FedMart was founded by entrepreneur Sol Price. Jim Sinegal started his career at FedMart and thought of Price as a mentor.

The pair developed and refined the wholesale club strategy together at FedMart, which was one of the first general merchandise retailers to expand into other categories like groceries, gasoline, and prescription drugs.

"I guess I've stolen – I actually prefer the word 'borrowed' – as many ideas from Sol Price as from anybody else in the business," Walton later said.

Price wanted his store to be a wholesale supplier for small businesses, and he opened his first location in an old aircraft hangar that was once used by aviator Howard Hughes.

The basic concept across each company was the same: shoppers pay a fee to gain access to bargain pricing. In each case, the business relies on membership fees more than product markups to earn a profit.

In the beginning, non-members could shop as long as they paid a 5% surcharge on their purchases. There are still a few ways to shop Costco without a membership.

Costco became a publicly traded company in 1985, initially offering shares for $10. Due to several stock splits, one initial Costco share would be equal to six today, worth a total of more than $5,250 as of December 10.

Price Club was largely in the Southwest, centered in San Diego, while Arkansas-based Sam's Club had the Midwest and Southeast, and Costco took the Northwest, headquartered in the Seattle area.

Even today, Costco only carries around 4,000 unique products in its assortment — referenced by stock-keeping-unit codes or SKUs — while typical supermarkets carry 30,000 or more. By comparison, a Walmart Supercenter typically carries around 120,000 SKUs.

Memberships from each brand were honored by the other.

A few remaining Price Club locations were rebranded to Costco at this time as well.

That year, the company ranked ninth among the world's largest retailers.

Costco also opened its fifth Business Center that year, a concept that caters more to small business owners than to household shoppers.

Sinegal continued to serve as Company Advisor and Director, ultimately retiring from the board in 2018.

Jelinek was in charge of opening Costco's sixth location and helped the company expand in Nevada and California. As vice president of merchandising, he oversaw a range of priorities, including e-commerce, foods, and pharmacy.

Walmart made nearly $675.6 billion in worldwide retail sales in 2024, followed by Amazon at $391.4 billion, and Costco at $244.9 billion, per the National Retail Federation.

Costco has made more than $237.7 billion in revenue for that fiscal year.

"When we load them on the site, they're typically gone within a few hours and we limit two per member," Galanti said on the fourth-quarter earnings call in September 2023.

Jelinek handed over leadership of the wholesale club to Ron Vachris, a 40-year company veteran who had served as Costco's president and chief operating officer since 2022.

A 40-year employee, Vachris started as a forklift driver at Costco's predecessor, Price Club, and has since worked in pretty much every area of the company.

"While I can't promise to be able to match the humor that Richard Galanti has become famous for, I can promise the same level of open dialogue and transparency you've come to expect," incoming CFO Gary Millerchip said during his first call in the role. "Oh, and to clear up some recent media speculation, I also want to confirm the $1.50 hot dog price is safe."

Costco's membership crackdown started in 2023 with ID checkers at self-checkout and expanded to the entrances of US warehouses over the next year.

Morgan Stanley analysts estimated in October 2024 that the move drove a significant number of non-member shoppers to finally pay the annual fee — a big lift for Costco's revenue and profit.

On September 1, 2024, Costco increased its fee from $60 to $65 for Gold Star memberships, with Executive memberships going from $120 to $130 — the first fee hikes in seven years.

"Our commitment to an enterprise rooted in respect and inclusion is appropriate and necessary," the board wrote in its annual proxy statement.

Shareholders later overwhelmingly rejected the proposal from a conservative activist group that would have required the company to prepare a special report on its DEI efforts.

Target saw nearly 5 million fewer shopping trips during the four weeks ending on February 9, according to data from Numerator. By contrast, Costco saw nearly 7.7 million more visits during the same period.

"We found that digital really enhances the speed of checkout, and so we are really working hard on the digital membership card usage," Vachris said during an earnings call in 2025.

"We've also engaged in some scan-and-go, done by Costco," he added.

"We estimate these incremental hours added about 1% to weekly US sales since implementation. This has been very well received by our members," Vachris said during its fourth quarter earnings call in 2025.

CFO Gary Millerchip also said that the extended hours and other new perks led a higher share of shoppers to upgrade their memberships.

Foot traffic data from Placer.ai also indicates the adjustment is helping the company accomplish several key goals, namely getting shoppers to visit more quickly and more often.