Costco recently started selling a new item.
According to CNBC
“The gold bars were listed at a price of $2,069.99 an ounce on Friday on the website, higher than the latest spot price of $2,020.58.”
Sell a product, make a $49 mark-up.
Sell another product, make another $49.
Not too shabby.
Bob Menendez should do the commercials.
Gold was $2089.70 on Dec 1.
About a 2.5% mark up on a form of investment.
When I read gold bars, I was thinking the 27 1/2 pound bars. That wouldn’t be a lot of bars sold.
I can understand that.
The sale of physical gold bullion involves overhead such as transportation, storage, delivery. Technically it’s a retail transaction that some people consider an investment.
It’s a 2.5% mark-up but they might be holding the gold for only a day or two.
2.5% on a two-day investment equates to a very very large annualized profit
As a retail transaction, the important part is the $49 they make on each transaction.
(A lot of small business merchants never quite understand this and some of them survive, some of them don’t.)
That said @Samm pointed out, Costco is now in a different position than they were last quarter because if they want to continue doing business at this price they may be taking a loss on every transaction.
When I would think they are selling it at a daily spot price +.
best guess:
They do that sorta.
They probably buy a bunch of gold (or gold futures to lock-in the price) for one month
and sell gold for that month at cost plus $49.
Mark Cuban (Shark Tank) has an online medicine business that works that way.
He adds cost, plus a flat fee ($20???), plus delivery fee for any prescription. He decided since he doesn’t actually own the drugs for more than few days it does not make sense for him to charge a % mark-up on price.
Not a bad business/pricing model. The risk is that a quantity of a product doesn’t sell quick enough.
They hold the eggnog they sell for just a day or two. And the pumpkin pies, and the bread… You get my point.
Know what? They’re charging less markup than the coin shop in the strip mall across the street. They sell it for less than someone would find it on eBay or Goldline. (It’s why they sell out so quickly.)
When they list them, they sell out in mere hours. Next time they list them, they’ll probably be priced relative to spot at the time.
According to people I know who work at Costco, the annual profit for Costco is primarily the amount of the membership fees for members. It’s not exactly that business model, but it comes close to that.
The profit on the products they sell essentially covers all the business overhead and salaries.
I dunno how long they’ve been doing it, but Walmart
now offer Gold bars also.
Current spot price: $2,082.90 USD
Average premium of +/- 3.1% to the spot price, sales tax not included.
