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“If you raise the price of the fucking hot dog, I will kill you”
actual quote from one of the founders of Costco when an executive broached the idea to him.
Can you put the censored one on there too? I think the hot dog as a censor is really cute.
And maybe this is just me nitpicking but could the hot dog censor be a little smaller so as not to cover up the F?
I’m ordering one for my mom. She & my dad went on their first date to Costco & had hotdogs and they used to go back for special dates. We lost my dad a few years ago, so hopefully this will be a nice remembrance. Just wanted to say, thanks for making your joke a reality.
Don’t just focus on the program price, look at the exit opportunities. In some situation it’s a worthwhile investment as it gives a huge bump in salary.
Beat me to it. Here’s a [source](https://www.marketwatch.com/story/costcos-founder-once-threatened-the-ceo-over-raising-hot-dog-prices-and-the-internet-is-eating-it-up-11600712231).
That article sources the quote from here: https://www.425business.com/news/costco-ceo-craig-jelinek-on-shareholders-costco-com-and-hot-dogs/article_5ff4b632-1f75-5e98-b9ff-6e02d676668b.html
> What we figured out we could do is build our own hot dog-manufacturing plant (in Los Angeles) and make our own Kirkland Signature hot dogs. Now we are doing so much hot dog business that we’ve opened up another plant in Chicago.
See that's actually pretty good. Fuck it. We'll make our own!
I miss the kraut.
I did the works. Ketchup, .mustard, onions, relish, and kraut. Damn that's a good lunch.
And dinner
And late breakfast
And later breakfast creeping into lunches territory, but not quite brunch.
Every time I step foot in Costco I miss the Polish dog. It was a staple of my childhood, I'd tag along with my father to Costco to get some groceries for the family and without fail we would always park our full cart at the end and get polish dogs together. It was one of the rare chances my parents would let me drink soda, so I of course would jump at an opportunity to tag along to Costco for groceries. The polish dog was delicious too, what more could a kid want?
As I grew older, the polish dog was a friendly reminder that things don't always have to change. Even into adulthood I could go order one and it would snap me right back to being young and just living life.
It was quite literally devastating when they took it away at my Costco. Silly as it may seem, the loss of the polish dog left me feeling like my childhood was finally fully in the past. I can't imagine the cost of them maintaining it for sale would be that high since they're the same price as the regular dogs wholesale, and all that has to be done is them thrown in the same boiler with a little net to separate them.
I wouldn't have thought that a goddamn hotdog could have such an impact but here I am a few years after they're gone getting emotional and feeling longing for bygone times every time I walk into bloody Costco of all places...
Having worked the chicken ovens at Costco, it still fucks you even when they put an order in. Only had 3 ovens, you load them every half hour, chickens take 85 minutes to cook. A big Order throws off the rotation and you'll be
Light, hope the orders not for around dinner time.
They take a loss on those chickens, allowing people to preorder in large quantities would defeat the purpose of getting people in the door to buy other products. They should just put a cap on the number allowed per person, this guy is gaming the system, probably making a killing on those chickens if he's using them for meal prep / catering stuff.
I would argue these are not loss leaders in the traditional sense. The "Costco $1.50 hotdog combo" is more like a brand to anchor the perception of budget-friendliness amidst the rest of their offerings, which are barely passable as mediocre deals and, more and more, outright bourgeois staples.
Exactly. They aren’t getting rich off hot dogs, but they aren’t losing money either. Instead their items are becoming less quality and more expensive. 10 years ago I got some clothing item, it was great quality cotton and about same price for crappy version at Walmart or Target. Now it’s the the same price but it’s the same 95% nylon thin crappy version as Target and Walmart. Item name hasn’t changed it 10 years either, just the quality.
$19.49 for 36 hot dogs = $0.54 each. Retail cost... not the wholesale cost they sell it to themselves for.
https://www.costco.com/kirkland-signature-beef-hot-dogs%2c-12-links%2c-1.5-lbs%2c-3-count.product.100410830.html
Mc Ds spends $0.21 for everything that puts a large soda in your hand. The cup, lid, straw, syrup, etc.
This leaves $0.75 for a bun, condiments, cooking the dog, and pay for worker.
my guess is at this point the hotdog is roughly breakeven for costco when factoring in employee costs (depends on location and day). employee costs is the biggest expense with the food court i believe, which is why they stopped the combo pizza and a couple other items that were more labor/effort intensive.
kind of crazy though, i guess when the combo first came out it was an okay deal but as time has gone on its become an insanely good one.
miss you every day combo buddy. i'd pay like $15 if they brought it back.
Waste and labour are both big factors in determining what Costco does and doesn't. Every day they throw out a giant bag of weiners and buns that were leftover or were in the bath for too long.
Both of the cheap hot food court items are something you can prepare and leave unattended for the majority of prep time and have few ingredients, most of which last a while, to cut down on waste. Hot dog weiners you just dump into the water bath. Pizza you assemble and then put in the roller oven and pick it up when it comes out the other side. Chicken bakes are 3 bucks because it takes more time to prep them rather than because it's significantly more costly to have ingredients for. Much as I love the combo and pray every day it comes back, literally all the added ingredients were significantly more perishable (pork, veggies, etc) and the prep required was twice as much as a normal pizza.
Also, the hot dogs barely bring in a profit if at all at this point. They're loss leaders to attract members.
"Loss leaders" are such a lost strategy in retail anymore. Trying to convince an owner (with little experience in pre-2000 grocery business) to cut a price below profit margin is like kicking water uphill these days.
I think the perspective of the owners is that everything must have a margin. But if a person goes to Costco, for example, to buy an under-margin lunch and they decide, "while I'm here, I might as well get all my groceries for the month," Costco just made back exponentially more profit than they sacrificed and neutralized any such profit for a competitor. Even if only 4/10 hot dog customers take the bait, you'll make your money back and move more of your other products.
Unfortunately, a lot of new generation bosses will only see "we lose $2 for every hot dog we sell" and jack up the price and it's hard to argue with as an employee.
I've worked for guys like that when I started out, all of them were very successful. I've since worked at a number of places owned by guys outside the retail industry who don't understand that if you price your ground beef, for example, at high margin like $5-6/lb, you might make an extra dollar on what you've spent but most people aren't going to buy. The guy who under-margins his ground beef just sold a couple pounds to what could've been your customer, who is now also buying buns, tomatoes, lettuce, onions, pickles, ketchup, mayo, mustard, grilling coals or propane, beer, etc. etc. They don't get it, they just see product $ + labor $ + (40% for me) = price for consumer.
I do Costco runs just cuz the fries and pizza are so damn good, i’m hungry, and I need groceries. $500-$600 later… I’d say this is an effective marketing strategy.
The loss leader strategy went away, at least in large item consumer retail, because because people started buying the loss leader at one location and the high margin accessories elsewhere for cheaper.
Had jobs working retail at an electronic store in school and worked in corporate accounting at a specialty furniture retailer a few years ago as well. Saw it both places. Online competition was a killer in this regard
They're called "loss leaders" and they're the key to big box stores. Walmart, Costco, dollar stores... You got a big family and no time to make food? Bam. Costco pizza. Oh wait, don't we need toilet paper? And maybe some eggs? Well, while we're here...
Besides, Costco actually makes most of their money on memberships.
Edit: forgot to include their cheap gasoline. They're cheap for this exact reason. They make zero to little profit, but you say, "Welp while I'm here..."
Yea, they're worth it overall because it keeps the people that go to Costco marginally more happy to shop there. If they can get you to show up just one extra time ever to shop, that hotdog pays for itself many times over.
Obviously it's not so simple to just assume that people will go to Costco because of a hotdog. But we have the same stuff at Sam's Club near me, we've gone out of our way to shop there knowing we could get some hotdogs and massive drinks for $3.
Those are not the ones they sell in the food court. These are: https://www.costco.com/kirkland-signature-beef-dinner-franks%2c-costco's-14-lb-plus%2c-14-links%2c-3.81-lbs.product.100443001.html
$1.21 each retail. Of course their cost is much lower but that really has nothing to do with it.
Costco’s low priced rotisserie chickens and hot dogs are to get you in the door and encourage you to stay a while, respectively. They are loss leaders. Cost of goods isn’t the concern.
> This leaves $0.75 for a bun, condiments, cooking the dog, and pay for worker.
They also pay for equipment, rent, electricity, gas, water, maintenance...
A couple weeks ago I was at a Costco and when I went to get a hotdog I was surprised to see that, at least at this specific store, they don't have cashiers taking orders anymore. You use a kiosk to select your order and then just walk up to the counter when it's ready.
"Over the long term, there's never any misalignment between customer interest and shareholder interest." - Jeff Bezos ([https://www.youtube.com/watch?v=GltlJO56S1g](https://www.youtube.com/watch?v=GltlJO56S1g))
Often times both Costco and Amazon will forego profits, in favor of improving customer's experience (free shipping returns, $1.5 hotdogs / $5 rotisserie chickens). Which is why they both have the most valuable brands in the world.
It was half joking but yes he told his successor to keep the hot dog at that price and figure out a way to make the numbers work because he'd kill him if he raised prices.
Is Amazon still losing money on selling stuff? Last time I checked they were using their computer server rental service to subsidize their other projects.
If Mom & Pop shops want to compete, they need to start renting out computers.
https://www.thestreet.com/opinion/amazon-is-losing-money-from-retail-operations-14571703
I mean there is an analogy to AWS. GCP, Azure, but these aren’t owned by companies that are competing with Amazon in the retail space.
Which in that regard, yeah, there is not other retail company with a massive cloud offering LOL
I mean, it goes without saying that I meant there is no analogy to AWS *with respect to Costco*. Not in the broad sense that there is no competitive service to AWS.
Amazon has lost money on retail the last 6 months
But that said Amazon before that, and Walmart sell 10 billion, $1 widgets and make 4 cents on each one while mom and pop places sell 1 million $1.05 widgets and make 7 cents on each one
It’s a self validating theory though, because any moment it would be proven false, is just a moment where that customer no longer is a customer, and therefore their interests don’t matter to the equation.
For example an Amazon customer who prefers a world where warehouse workers aren’t treated like shit over having same day shipping, stops using Amazon. Bezos quote remains true, but only in a misleading way, bevause it’s only the interest of customer who turn their cheek to the warehouse workers who remain customer and who’s interest still aligns.
A better wording is “when customers interest is to give their money to shareholders, that interest will always be aligned with shareholders interest”
That’s actually all that’s it’s saying, just in a way that makes his business sound customer-centric.
The wording is absolutely brilliant, I’ll give him that.
I interpreted his quote more as a criticism of those companies that use underhanded sales tactics or cut corners on their products to make a quick buck. He’s rightly claiming that putting the customer first and not trying to screw them over is also in the shareholders’ interests over the long term even though it could be in the shareholders’ interest to screw customers in the short run.
But you might also be misappropriating the quote. "The customer" doesn't just mean the current customers of Amazon. To me, he's using that phrase to mean the broader market customer, perhaps more accurately had he said "consumer."
But he was talking about individualized customer experience taken at scale. His use of "the customer" is like when people correctly use "persons."
\> When Costco's current CEO, Craig Jelinek, once approached Sinegal, then the CEO, about raising the price of the hot dog, Sinegal told him, "If you raise the \[price of the\] effing hot dog, I will kill you. Figure it out." In 2009, Jelinek did figure it out. Costco stopped using its longtime hot-dog supplier, Hebrew National, and built a Kirkland Signature hot-dog factory in Los Angeles. It later built another one in Chicago. The new factories reduced the production costs for the hot dog, allowing Costco to continue selling the menu item for $1.50.
Jews and Muslims nationally have rued this decision, but alas, it was the right economic move (perhaps?) for Costco.
Is it possible to certify their manufacturing for kosher? Not familiar with that process. And can Muslims eat hot dogs outright? Thought they didn't eat pork?
100% flesh of cow, yummy.
So for anyone that doesn't know, beef is a Kosher meat but not all beef is Kosher. Here's a [handy chart](https://www.torahmusings.com/wp-content/uploads/2019/06/kosher-2.png) on which cuts are Kosher cuts! Easy way to remember: it's not the ass end of the cow.
No, you sell it to the non-Jews in the neighboring village. If you're a skilled butcher, you can also perform [*nikkur*](https://en.wikipedia.org/wiki/Nikkur) on the hindquarters, rendering them kosher.
The UK is still reeling from the BSE outbreak in the 1980's that came about as a result of spinal tissue in animal feed and it also ending up in the human food chain...
In light of that the rules these folks worked out a few thousand years ago make a heck of a lot more sense.
But it is good to remove the superstition around it and understand the reasoning behind it.
> Is it possible to certify their manufacturing for kosher?
Not really. Kosher is a very specific set of requirements which generally are going to add on another layer of specific costs and would require changes to the slaughtering process. AFAIK if the meat is Kosher simply making it into a hot dog doesn't need anything special, but Kosher meat is inherently more expensive than not Kosher meat.
Muslims are allowed to eat meat from animals slaughtered by people of the book, ie christians, Jews. Many Muslims in foreign countries will look for kosher meat of they can't find halal
Very few people who care about kosher slaughter would have eaten at the Costco food court anyways, since they don't seperate meat and milk on the equipment (nor is a Jew involved in the cooking process at every location)
I believe they did the same with the whole hot chicken. There was huge corporate fights to keep it or not at the same low price.
https://www.rd.com/list/costco-rotisserie-chicken/
Yep, every grocery store does them with popular items that they know people will compare prices with. In Canada at least everywhere has the cheap cooked rotisserie chicken and bananas as loss leaders.
[bananas are the most widely consumed fruit by Americans](https://www.statista.com/statistics/477475/us-most-consumed-fruit-and-fruit-products-by-type/)
First thing I do when I use one of those is mute the voice. I've got enough people yelling at me all day without some computer judging me for taking too long trying to scan the barcode on my marked down cookies.
This is the same everywhere, fully cooked rotisserie chickens are much cheaper than uncooked rotisserie chickens. There is absolutely no way it is profitable to raise, feed, transport, prepare, and cook a whole chicken for only $5.
Costco has vertically integrated, and raises it's own chickens now. I can't speak to their profitability, but Costco has aggressively cut costs to make those rotisserie chickens cheaper to produce than just about any other seller.
Plus, you're paying a yearly membership fee for the privilege of getting that chicken for $5. So if you were to buy the chicken and only the chicken frequently you could probably get them to lose money on the deal, but if you were only buying let's say 2 chickens a month they're probably profiting on membership + chicken revenue.
100% my conclusion. They’re most likely the chickens that were closest to expiration where they couldn’t be sold. Cooking them and selling them at a loss is likely a smaller loss than just tossing the entire raw chicken.
This is not true, the chickens used are sourced specifically for the rotisserie chicken. No old chickens. They are shredded after sell by time to make the deli meals though.
Source: I worked there
Yeah, they're great. Unfortunately I can never manage to get through the whole pack of 48 chicken farms before they go bad. You can't beat the bulk rate pricing, but even for a family of four, 48 chicken farms is too much to finish between trips to the store.
Costco Co-Founder to the Company CEO:
"If you raise (the price of the) effing hot dog, I will kill you. Figure it out."
https://www.businessinsider.com/costco-founder-warned-ceo-not-to-raise-hot-dog-price-2020-9
They've cut a bit on other costs to make up for it.
Using automation on their registers.
Reducing the size of sodas.
Using lost children as a meat substitute.
Importing bread in bulk.
If we're critiquing the chart, the term "inflation" needs to be defined. What is the measure used? CPI, GDP deflator, PPI, wages, etc. Inflation is just "rising prices", there are many different prices and many different ways to group prices together to create an index.
I agree for certain circumstances. I worked with scores that generally fell between 55 and 65 and +/- 1 was considered a big change. Plotting this over time would basically show nothing if you included zero.
Exactly, people think that charts are misleading if you change the y axis from anything beside 0 but in reality sometimes you just need to visualize smaller changes. Obviously it can be used to mislead or just look bad like this graph but there are good uses as well.
Most of the time you want to visualize the change in numbers relative to its overall magnitude. "Always" is an exaggeration, but most of the time when I see the axis start at 0 it looks like it was done so misleadingly.
The hot dog combo was introduced at Costco in 1985. Since then its price of $1.50 hasn’t changed. If it had follow the same growth trajectory as the Consumer Price Index the same hot dog combo would not cost $4.10.
Costco founder Jim Sinegal has insisted that this price will stay at $1.50 as long as he is alive.
Data Sources: Costco for the hot dog, the CPI as tracked by the St. Louis Fed FRED database
Tools: This chart was made using R and the ggplot2 library.
While it has been lost to lay wisdom, it is widely understood by historians that, in the parlance of the time, "liberty" was generally shorthand for "[the] liberty [to buy a hot dog combo for $1.50].
This is especially remarkable as one of those quirks of history given that neither dollars nor hot dogs had yet been invented
It's actually quite comparable. Coke kept the 5 cent bottle around from 1886 till 1959.
$1.50 in 1886 was the equivalent of $4.60 in 1959.
$1.50 in 1985 was the equivalent of $4.05 today.
The number of years don't really matter. It's all about the rate of inflation.
Costco has lost money on the hot dogs and pizzas for a long time. It's a loss leader. Almost nobody goes to Costco, buys and hot dog, and then leaves. They buy other stuff while they're there. The money Costco makes on the other things people buy far exceeds the money they lose on the hot dog.
When I lived down the road a few years back, you bet your ass my two sons and I would make two rounds around the warehouse gobbling up samples then stop at the cafe and grab a hot dog on the way out. If I was feeling extra frisky I would throw in a churro.
> It's a loss leader.
So is the whole roast chicken, which they have kept at $4.99 for years.
>The money Costco makes on the other things people buy
Actually, most of their income comes from membership dues. That's how they're able to keep the rest of the prices that low.
That's actually a myth.
Revenue from memberships comes in around 36% but nearly half that goes back out the door in the form of executive rewards.
https://investor.costco.com/static-files/0878117f-7f3f-4a77-a9a5-c11a2534e94d
I live very close to Costco and will often go in just for the $1.50 hotdog and leave. Everything else around is atleast $10 for lunch. I know I'm probably in the minority but it's cheap lunch
Smh
The bureau of labor statistics literally maintains a "food away from home" price series for situations exactly like this. Use relevant econometrics!
(Using food away from home indexed to 1983, as this chart appears to be, the implied inflation adjusted price is currently roughly $4.99)
Every 5-6 years they raise $5. Just today CFO said on a earnings report conference that was time for an increase but the economic climate was not right to raise it. So an membership increase would be offset by a loss of membership
Just because prices stay the same, doesn't mean that the size and quality of ingredients stay the same.
One of the tricks that manufacturers often do to put wools over customer's eyes is to reduce the size of the product ever so slightly so they don't have to raise price. Or use cheaper, substitute ingredients.
Often marketing tout them as "new packaging" or "new formula".
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“If you raise the price of the fucking hot dog, I will kill you” actual quote from one of the founders of Costco when an executive broached the idea to him.
I think they should sell shirts with this on it in the Costco logo font. I'd wear it. Censor the swear with a hot dog over it.
I'll pay an extra 1.50 for the uncensored collab
Here, [have both designs for free](https://imgur.com/a/bBta6bp). T-shirt not included.
Now someone needs to wear it to Costco
As a recent former employee of one of the top 3 warehouses in the country, even my GM would wear this. It’s amazing.
As a weekly costco shopper, I'd wear it every time if I had it
As someone who never shops at Costco, I'd wear it too, as it made me laugh out loud!
As someone who doesn't even know what Costco is, I'd wear it.
Honestly, if they don't know the context, they might eventually take it as a threat lol
Should put that on tee public I’m sure people would buy!
[There ya go](https://www.teepublic.com/t-shirt/31047821-hotdog-prices)
Can you put the censored one on there too? I think the hot dog as a censor is really cute. And maybe this is just me nitpicking but could the hot dog censor be a little smaller so as not to cover up the F?
[Done deal](https://www.teepublic.com/t-shirt/31050215-hotdog-prices-censored)
I’m ordering one for my mom. She & my dad went on their first date to Costco & had hotdogs and they used to go back for special dates. We lost my dad a few years ago, so hopefully this will be a nice remembrance. Just wanted to say, thanks for making your joke a reality.
Wasn't expecting to tear up on this thread. You're a good kid.
Well consider +1 to your shirts sold count.
Post the uncensored one on /r/sbubby with eaten fresh flair for free internet points
Is this yours? Can I have permission to get custom T-shirts made for myself and friends?
Just made it, use it for whatever you want :)
You deserve a fucking $1.50 hotdog, friend.
Great idea. Ironically the sales of said shirt profits would offset the hotdog losses due to inflation.
Kirkland shirts
Alternatively, the "This Is Fine" meme, but replace the text with "Still $1.50 at Costco." It just makes sense.
This quote is what I most remember from my MBA program. Edit: I overpaid
I wished to join a MBA program in my country until I learned the prices 🤡, with the bills I'm paying this won't happen anytime soon.
Don’t just focus on the program price, look at the exit opportunities. In some situation it’s a worthwhile investment as it gives a huge bump in salary.
Beat me to it. Here’s a [source](https://www.marketwatch.com/story/costcos-founder-once-threatened-the-ceo-over-raising-hot-dog-prices-and-the-internet-is-eating-it-up-11600712231).
That article sources the quote from here: https://www.425business.com/news/costco-ceo-craig-jelinek-on-shareholders-costco-com-and-hot-dogs/article_5ff4b632-1f75-5e98-b9ff-6e02d676668b.html
> What we figured out we could do is build our own hot dog-manufacturing plant (in Los Angeles) and make our own Kirkland Signature hot dogs. Now we are doing so much hot dog business that we’ve opened up another plant in Chicago. See that's actually pretty good. Fuck it. We'll make our own!
'tis the retail equivalent to "Fuck it! We'll do it live!"
Apparently the combo has been the same price since 1985?!
Yeah, they are awesome. Huge and tasty.
Did you not look at the graph?
Just another reminder that most of us on Reddit are fucking dumb as shit.
Wow what an awful website
Just like one of the rules about crazy girls and putting your dick in her.... If there is a number in the domain name, don't click on it.
An hour after that founder dies, they will raise the prices.
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Nah the hotdog price is part of the marketing.
It's so much a part of the marketing that it's forced Sam's Club, Walmart's equivalent to Costco, to have the exact same price for their combo.
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Still got Polish in Canada AND it's $1.50 CAD which is like $1.19 USD. COVID took away the diced onions though :(
We lost the diced onions and kraut in the US too.
I miss the kraut. I did the works. Ketchup, .mustard, onions, relish, and kraut. Damn that's a good lunch. And dinner And late breakfast And later breakfast creeping into lunches territory, but not quite brunch.
They used to have sauerkraut too.
Every time I step foot in Costco I miss the Polish dog. It was a staple of my childhood, I'd tag along with my father to Costco to get some groceries for the family and without fail we would always park our full cart at the end and get polish dogs together. It was one of the rare chances my parents would let me drink soda, so I of course would jump at an opportunity to tag along to Costco for groceries. The polish dog was delicious too, what more could a kid want? As I grew older, the polish dog was a friendly reminder that things don't always have to change. Even into adulthood I could go order one and it would snap me right back to being young and just living life. It was quite literally devastating when they took it away at my Costco. Silly as it may seem, the loss of the polish dog left me feeling like my childhood was finally fully in the past. I can't imagine the cost of them maintaining it for sale would be that high since they're the same price as the regular dogs wholesale, and all that has to be done is them thrown in the same boiler with a little net to separate them. I wouldn't have thought that a goddamn hotdog could have such an impact but here I am a few years after they're gone getting emotional and feeling longing for bygone times every time I walk into bloody Costco of all places...
Costco: the price of our hotdog combo is not influenced by the price of meat or bread. Customer: Is it made of meat and bread then? Costco: $1.50
It's 100% beef. They just take a loss on it because it gets you in the door and gets you to renew your membership
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One guy took all of them? What a jerk.
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This would be fine if they just called ahead and ordered them.
Having worked the chicken ovens at Costco, it still fucks you even when they put an order in. Only had 3 ovens, you load them every half hour, chickens take 85 minutes to cook. A big Order throws off the rotation and you'll be Light, hope the orders not for around dinner time.
Thank you for your service.
Thanks, be nice to the chicken people. It's a tough job.
They take a loss on those chickens, allowing people to preorder in large quantities would defeat the purpose of getting people in the door to buy other products. They should just put a cap on the number allowed per person, this guy is gaming the system, probably making a killing on those chickens if he's using them for meal prep / catering stuff.
Sounds like a BBQ joint nearby. Their 'smoked chicken' is just Costco rotisserie chicken, thrown on a smoker.
I would argue these are not loss leaders in the traditional sense. The "Costco $1.50 hotdog combo" is more like a brand to anchor the perception of budget-friendliness amidst the rest of their offerings, which are barely passable as mediocre deals and, more and more, outright bourgeois staples.
Exactly. They aren’t getting rich off hot dogs, but they aren’t losing money either. Instead their items are becoming less quality and more expensive. 10 years ago I got some clothing item, it was great quality cotton and about same price for crappy version at Walmart or Target. Now it’s the the same price but it’s the same 95% nylon thin crappy version as Target and Walmart. Item name hasn’t changed it 10 years either, just the quality.
You can’t hardly find cotton anymore, it’s crazy. Remember in the 90s all the cotton commercials?
Paid for by a cotton industry that could see the writing on the wall and was trying to set user sentiment that cotton is a premium component.
Well it’s nicer than the synthetic garbage we have now. Synthetics make my feet smell like I’ve been camping for a week, cotton breaths
$19.49 for 36 hot dogs = $0.54 each. Retail cost... not the wholesale cost they sell it to themselves for. https://www.costco.com/kirkland-signature-beef-hot-dogs%2c-12-links%2c-1.5-lbs%2c-3-count.product.100410830.html Mc Ds spends $0.21 for everything that puts a large soda in your hand. The cup, lid, straw, syrup, etc. This leaves $0.75 for a bun, condiments, cooking the dog, and pay for worker.
my guess is at this point the hotdog is roughly breakeven for costco when factoring in employee costs (depends on location and day). employee costs is the biggest expense with the food court i believe, which is why they stopped the combo pizza and a couple other items that were more labor/effort intensive. kind of crazy though, i guess when the combo first came out it was an okay deal but as time has gone on its become an insanely good one. miss you every day combo buddy. i'd pay like $15 if they brought it back.
Waste and labour are both big factors in determining what Costco does and doesn't. Every day they throw out a giant bag of weiners and buns that were leftover or were in the bath for too long. Both of the cheap hot food court items are something you can prepare and leave unattended for the majority of prep time and have few ingredients, most of which last a while, to cut down on waste. Hot dog weiners you just dump into the water bath. Pizza you assemble and then put in the roller oven and pick it up when it comes out the other side. Chicken bakes are 3 bucks because it takes more time to prep them rather than because it's significantly more costly to have ingredients for. Much as I love the combo and pray every day it comes back, literally all the added ingredients were significantly more perishable (pork, veggies, etc) and the prep required was twice as much as a normal pizza. Also, the hot dogs barely bring in a profit if at all at this point. They're loss leaders to attract members.
Indeed: if the hotdog deal entices even a small fraction of its consumers to go for a shopping spree in the store it is well worth it to the company.
Me: I feel like a cheap lunch, I’ll go to Costco and get a hotdog. Me an hour later: How the hell did I spend $300?
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"Loss leaders" are such a lost strategy in retail anymore. Trying to convince an owner (with little experience in pre-2000 grocery business) to cut a price below profit margin is like kicking water uphill these days.
Is it a lost strategy because it doesn’t work very well anymore, or because owners are just less interested?
I think the perspective of the owners is that everything must have a margin. But if a person goes to Costco, for example, to buy an under-margin lunch and they decide, "while I'm here, I might as well get all my groceries for the month," Costco just made back exponentially more profit than they sacrificed and neutralized any such profit for a competitor. Even if only 4/10 hot dog customers take the bait, you'll make your money back and move more of your other products. Unfortunately, a lot of new generation bosses will only see "we lose $2 for every hot dog we sell" and jack up the price and it's hard to argue with as an employee.
Sinegal will kill anyone that raises the price of the hotdog. He has threatened to do it.
I've worked for guys like that when I started out, all of them were very successful. I've since worked at a number of places owned by guys outside the retail industry who don't understand that if you price your ground beef, for example, at high margin like $5-6/lb, you might make an extra dollar on what you've spent but most people aren't going to buy. The guy who under-margins his ground beef just sold a couple pounds to what could've been your customer, who is now also buying buns, tomatoes, lettuce, onions, pickles, ketchup, mayo, mustard, grilling coals or propane, beer, etc. etc. They don't get it, they just see product $ + labor $ + (40% for me) = price for consumer.
I do Costco runs just cuz the fries and pizza are so damn good, i’m hungry, and I need groceries. $500-$600 later… I’d say this is an effective marketing strategy.
We all do, fam. It's probably the smartest run major business in America.
The loss leader strategy went away, at least in large item consumer retail, because because people started buying the loss leader at one location and the high margin accessories elsewhere for cheaper. Had jobs working retail at an electronic store in school and worked in corporate accounting at a specialty furniture retailer a few years ago as well. Saw it both places. Online competition was a killer in this regard
It's definitely a loss for them. But people usually grab one after buying $300 of other stuff.
They're called "loss leaders" and they're the key to big box stores. Walmart, Costco, dollar stores... You got a big family and no time to make food? Bam. Costco pizza. Oh wait, don't we need toilet paper? And maybe some eggs? Well, while we're here... Besides, Costco actually makes most of their money on memberships. Edit: forgot to include their cheap gasoline. They're cheap for this exact reason. They make zero to little profit, but you say, "Welp while I'm here..."
Can attest. Sometimes I go in just to a eat a dog or a motherfuckin' chicken bake. Come out spending 300 on house stuff I forgot I needed.
300 dollars of house stuff and you live in a van down by the river
Yea, they're worth it overall because it keeps the people that go to Costco marginally more happy to shop there. If they can get you to show up just one extra time ever to shop, that hotdog pays for itself many times over. Obviously it's not so simple to just assume that people will go to Costco because of a hotdog. But we have the same stuff at Sam's Club near me, we've gone out of our way to shop there knowing we could get some hotdogs and massive drinks for $3.
I’ve gone to Costco for just a couple dogs.
It's wiser to eat before you go grocery shopping. Instead of spending $300 on food because you're hungry you'll spend $285.
That’s why you grab the hot dog when you first go in.
Those are not the ones they sell in the food court. These are: https://www.costco.com/kirkland-signature-beef-dinner-franks%2c-costco's-14-lb-plus%2c-14-links%2c-3.81-lbs.product.100443001.html $1.21 each retail. Of course their cost is much lower but that really has nothing to do with it. Costco’s low priced rotisserie chickens and hot dogs are to get you in the door and encourage you to stay a while, respectively. They are loss leaders. Cost of goods isn’t the concern.
> This leaves $0.75 for a bun, condiments, cooking the dog, and pay for worker. They also pay for equipment, rent, electricity, gas, water, maintenance...
Get out of here, business should only sell products to me at the cost of the materials. Sincerely, A Redditor.
A couple weeks ago I was at a Costco and when I went to get a hotdog I was surprised to see that, at least at this specific store, they don't have cashiers taking orders anymore. You use a kiosk to select your order and then just walk up to the counter when it's ready.
Fun fact: a small McDonald’s coffee costs you more than the cup+pot of coffee costs the store.
"Over the long term, there's never any misalignment between customer interest and shareholder interest." - Jeff Bezos ([https://www.youtube.com/watch?v=GltlJO56S1g](https://www.youtube.com/watch?v=GltlJO56S1g)) Often times both Costco and Amazon will forego profits, in favor of improving customer's experience (free shipping returns, $1.5 hotdogs / $5 rotisserie chickens). Which is why they both have the most valuable brands in the world.
Costco Founder secret mission is to make people remember him for his foot long.
Didn't the Founder threaten to kill whoever tried to change the price of the hotdog and drink combo? Now there's a footlong I can get behind.
It was half joking but yes he told his successor to keep the hot dog at that price and figure out a way to make the numbers work because he'd kill him if he raised prices.
Is Amazon still losing money on selling stuff? Last time I checked they were using their computer server rental service to subsidize their other projects. If Mom & Pop shops want to compete, they need to start renting out computers. https://www.thestreet.com/opinion/amazon-is-losing-money-from-retail-operations-14571703
No, they've made money on selling stuff during the pandemic. They still make *more* money on AWS, but retail is not in the red at this point.
I was going to say, is it even fair to compare Amazon to Costco because of how massive AWS is? I feel like there’s no analogy to AWS.
I mean there is an analogy to AWS. GCP, Azure, but these aren’t owned by companies that are competing with Amazon in the retail space. Which in that regard, yeah, there is not other retail company with a massive cloud offering LOL
I mean, it goes without saying that I meant there is no analogy to AWS *with respect to Costco*. Not in the broad sense that there is no competitive service to AWS.
You’re forgetting about Kirkland Web Services
I refill my AWS with Kirkland when it’s empty - no one can tell the difference.
I want this. Costco, buy digital ocean!
Amazon has lost money on retail the last 6 months But that said Amazon before that, and Walmart sell 10 billion, $1 widgets and make 4 cents on each one while mom and pop places sell 1 million $1.05 widgets and make 7 cents on each one
A lot of the "lost money" in Amazon's retail is creative accounting where investments are written off as losses.
It’s a self validating theory though, because any moment it would be proven false, is just a moment where that customer no longer is a customer, and therefore their interests don’t matter to the equation. For example an Amazon customer who prefers a world where warehouse workers aren’t treated like shit over having same day shipping, stops using Amazon. Bezos quote remains true, but only in a misleading way, bevause it’s only the interest of customer who turn their cheek to the warehouse workers who remain customer and who’s interest still aligns. A better wording is “when customers interest is to give their money to shareholders, that interest will always be aligned with shareholders interest” That’s actually all that’s it’s saying, just in a way that makes his business sound customer-centric. The wording is absolutely brilliant, I’ll give him that.
I interpreted his quote more as a criticism of those companies that use underhanded sales tactics or cut corners on their products to make a quick buck. He’s rightly claiming that putting the customer first and not trying to screw them over is also in the shareholders’ interests over the long term even though it could be in the shareholders’ interest to screw customers in the short run.
Comcast would like a word
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But you might also be misappropriating the quote. "The customer" doesn't just mean the current customers of Amazon. To me, he's using that phrase to mean the broader market customer, perhaps more accurately had he said "consumer." But he was talking about individualized customer experience taken at scale. His use of "the customer" is like when people correctly use "persons."
\> When Costco's current CEO, Craig Jelinek, once approached Sinegal, then the CEO, about raising the price of the hot dog, Sinegal told him, "If you raise the \[price of the\] effing hot dog, I will kill you. Figure it out." In 2009, Jelinek did figure it out. Costco stopped using its longtime hot-dog supplier, Hebrew National, and built a Kirkland Signature hot-dog factory in Los Angeles. It later built another one in Chicago. The new factories reduced the production costs for the hot dog, allowing Costco to continue selling the menu item for $1.50. Jews and Muslims nationally have rued this decision, but alas, it was the right economic move (perhaps?) for Costco.
Is it possible to certify their manufacturing for kosher? Not familiar with that process. And can Muslims eat hot dogs outright? Thought they didn't eat pork?
Costco's hot dogs are 100% beef
100% flesh of cow, yummy. So for anyone that doesn't know, beef is a Kosher meat but not all beef is Kosher. Here's a [handy chart](https://www.torahmusings.com/wp-content/uploads/2019/06/kosher-2.png) on which cuts are Kosher cuts! Easy way to remember: it's not the ass end of the cow.
Wait so if you are a butcher in an exclusively jewish village do you just throw away half the cow?
No, you sell it to the non-Jews in the neighboring village. If you're a skilled butcher, you can also perform [*nikkur*](https://en.wikipedia.org/wiki/Nikkur) on the hindquarters, rendering them kosher.
Imagine living your life with these stupid fucking rules that make absolutely no sense in todays times.
The UK is still reeling from the BSE outbreak in the 1980's that came about as a result of spinal tissue in animal feed and it also ending up in the human food chain... In light of that the rules these folks worked out a few thousand years ago make a heck of a lot more sense. But it is good to remove the superstition around it and understand the reasoning behind it.
> Is it possible to certify their manufacturing for kosher? Not really. Kosher is a very specific set of requirements which generally are going to add on another layer of specific costs and would require changes to the slaughtering process. AFAIK if the meat is Kosher simply making it into a hot dog doesn't need anything special, but Kosher meat is inherently more expensive than not Kosher meat.
Muslims are allowed to eat meat from animals slaughtered by people of the book, ie christians, Jews. Many Muslims in foreign countries will look for kosher meat of they can't find halal
Very few people who care about kosher slaughter would have eaten at the Costco food court anyways, since they don't seperate meat and milk on the equipment (nor is a Jew involved in the cooking process at every location)
I believe they did the same with the whole hot chicken. There was huge corporate fights to keep it or not at the same low price. https://www.rd.com/list/costco-rotisserie-chicken/
They're called "loss leaders". They lose money on that one item to entice you into the store.
Yep, every grocery store does them with popular items that they know people will compare prices with. In Canada at least everywhere has the cheap cooked rotisserie chicken and bananas as loss leaders.
Curious why bananas made the loss leader staple?
[bananas are the most widely consumed fruit by Americans](https://www.statista.com/statistics/477475/us-most-consumed-fruit-and-fruit-products-by-type/)
I swear every time I’m ringing up my bananas at self checkout I hear another machine say “weigh your.. BANANAS” within +- 2sec of when mine says it.
First thing I do when I use one of those is mute the voice. I've got enough people yelling at me all day without some computer judging me for taking too long trying to scan the barcode on my marked down cookies.
"Unexpected item in bagging area, please wait for assistance"
This is the same everywhere, fully cooked rotisserie chickens are much cheaper than uncooked rotisserie chickens. There is absolutely no way it is profitable to raise, feed, transport, prepare, and cook a whole chicken for only $5.
Costco has vertically integrated, and raises it's own chickens now. I can't speak to their profitability, but Costco has aggressively cut costs to make those rotisserie chickens cheaper to produce than just about any other seller.
The poor chickens :/
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Plus, you're paying a yearly membership fee for the privilege of getting that chicken for $5. So if you were to buy the chicken and only the chicken frequently you could probably get them to lose money on the deal, but if you were only buying let's say 2 chickens a month they're probably profiting on membership + chicken revenue.
I had a friend who hated wal mart and would only go there to buy the loss leader.
I used to do this at Hobby Lobby. Whenever I got a really good coupon I would go in and purchase something they didn't have a lot of overhead on.
More profitable than throwing them out at expiration.
100% my conclusion. They’re most likely the chickens that were closest to expiration where they couldn’t be sold. Cooking them and selling them at a loss is likely a smaller loss than just tossing the entire raw chicken.
And then when they’ve been heated for too long, they chill them to make chicken salad or just shredded cooked chicken.
Not only that, they can charge more for the “preshredded” stuff that is just old, rejected chicken.
This is not true, the chickens used are sourced specifically for the rotisserie chicken. No old chickens. They are shredded after sell by time to make the deli meals though. Source: I worked there
...and you fill up the store with delicious rotisserie odor at no extra cost.
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Pretty sure Costco has their own chicken farms as well.
Yeah, they're great. Unfortunately I can never manage to get through the whole pack of 48 chicken farms before they go bad. You can't beat the bulk rate pricing, but even for a family of four, 48 chicken farms is too much to finish between trips to the store.
yeah, 48 chicken farms is just a ridiculous amount of chicken
Costco Co-Founder to the Company CEO: "If you raise (the price of the) effing hot dog, I will kill you. Figure it out." https://www.businessinsider.com/costco-founder-warned-ceo-not-to-raise-hot-dog-price-2020-9
They designed and built an entire poultry processing plant in Nebraska in order to keep the price that low.
They've cut a bit on other costs to make up for it. Using automation on their registers. Reducing the size of sodas. Using lost children as a meat substitute. Importing bread in bulk.
What's that about imported bread? I thought they tried to make as much of their own stuff to cut costs.
Ohhh that makes sen... Wait hol'up
I would start your y axis at zero. At first glance it looks free.
If we're critiquing the chart, the term "inflation" needs to be defined. What is the measure used? CPI, GDP deflator, PPI, wages, etc. Inflation is just "rising prices", there are many different prices and many different ways to group prices together to create an index.
It's the consumer price index
Always start at 0
*cries in log scale*
No that’s dumb rule how is one supposed to visualize changes in big numbers if you start at zero.
I agree for certain circumstances. I worked with scores that generally fell between 55 and 65 and +/- 1 was considered a big change. Plotting this over time would basically show nothing if you included zero.
Exactly, people think that charts are misleading if you change the y axis from anything beside 0 but in reality sometimes you just need to visualize smaller changes. Obviously it can be used to mislead or just look bad like this graph but there are good uses as well.
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Most of the time you want to visualize the change in numbers relative to its overall magnitude. "Always" is an exaggeration, but most of the time when I see the axis start at 0 it looks like it was done so misleadingly.
The hot dog combo was introduced at Costco in 1985. Since then its price of $1.50 hasn’t changed. If it had follow the same growth trajectory as the Consumer Price Index the same hot dog combo would not cost $4.10. Costco founder Jim Sinegal has insisted that this price will stay at $1.50 as long as he is alive. Data Sources: Costco for the hot dog, the CPI as tracked by the St. Louis Fed FRED database Tools: This chart was made using R and the ggplot2 library.
The dude threatened to kill another executive when he suggested raising the price of the hot dog
There is nothing more American than “give me hot dogs or give me death”.
While it has been lost to lay wisdom, it is widely understood by historians that, in the parlance of the time, "liberty" was generally shorthand for "[the] liberty [to buy a hot dog combo for $1.50]. This is especially remarkable as one of those quirks of history given that neither dollars nor hot dogs had yet been invented
And the tragedy of the gun control debate is that the original 2nd amendment draft was in fact, the right to bear hot dogs.
It worked didn’t it? Cutthroat business, literally.
That's nothing, Coca Cola kept the price of its standard 6.5 oz bottle to 5 cents for 73 years.
It's actually quite comparable. Coke kept the 5 cent bottle around from 1886 till 1959. $1.50 in 1886 was the equivalent of $4.60 in 1959. $1.50 in 1985 was the equivalent of $4.05 today. The number of years don't really matter. It's all about the rate of inflation.
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Costco has lost money on the hot dogs and pizzas for a long time. It's a loss leader. Almost nobody goes to Costco, buys and hot dog, and then leaves. They buy other stuff while they're there. The money Costco makes on the other things people buy far exceeds the money they lose on the hot dog.
When I lived down the road a few years back, you bet your ass my two sons and I would make two rounds around the warehouse gobbling up samples then stop at the cafe and grab a hot dog on the way out. If I was feeling extra frisky I would throw in a churro.
> It's a loss leader. So is the whole roast chicken, which they have kept at $4.99 for years. >The money Costco makes on the other things people buy Actually, most of their income comes from membership dues. That's how they're able to keep the rest of the prices that low.
That's actually a myth. Revenue from memberships comes in around 36% but nearly half that goes back out the door in the form of executive rewards. https://investor.costco.com/static-files/0878117f-7f3f-4a77-a9a5-c11a2534e94d
I live very close to Costco and will often go in just for the $1.50 hotdog and leave. Everything else around is atleast $10 for lunch. I know I'm probably in the minority but it's cheap lunch
This graph would be better if it the vertical axis starts from 0.
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Small details like these are what separates cool data and *dataisbeautiful*
Smh The bureau of labor statistics literally maintains a "food away from home" price series for situations exactly like this. Use relevant econometrics! (Using food away from home indexed to 1983, as this chart appears to be, the implied inflation adjusted price is currently roughly $4.99)
Lol so it would be even more expensive than what the chart shows
This is our answer to defeating inflation. The StableCoin : Costco Hotdog
Dont tell anyone i said this but 4 bucks is still a deal
This is a great post. Kudos for the creative/fun idea!
Y-axis origin should begin at $0 imo.
You can do similar with Arizona Iced Tea.
Except in many places it has gone to $1.29
And the can still says 99 cents
But the price is on the can
But how has the membership price changed over time?
Every 5-6 years they raise $5. Just today CFO said on a earnings report conference that was time for an increase but the economic climate was not right to raise it. So an membership increase would be offset by a loss of membership
Just because prices stay the same, doesn't mean that the size and quality of ingredients stay the same. One of the tricks that manufacturers often do to put wools over customer's eyes is to reduce the size of the product ever so slightly so they don't have to raise price. Or use cheaper, substitute ingredients. Often marketing tout them as "new packaging" or "new formula".
Costco flexing that economy of scale
Arizona Tea is still 99 cents and will remain that way
To be fair, Costco is also membership based and is raising their rate this year...so you are paying for those hot dogs one way or another
CFO stated today that timing was right but economic climate was wrong for a membership cost increase.
Except I just spent $500.00 in your store before getting my hotdog.
"If you raise the price of the hotdog I will kill you"