Jeff Caplan’s Minute of News: The secret you didn’t know about Costco

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SALT LAKE CITY — Business is easy. You buy for one, sell for two — you make money. But Sol Price had a different idea.

He was a lawyer who represented grocery stores the New York Times says in the 1950s. Sol Price took over empty warehouses in San Diego and sold a lot of this and that at rock-bottom prices. He called his warehouses FedMart Price Club, later shortened to Costco.

Now here’s the part you didn’t know. Because he was a socialist, Sol Price believed a business shouldn’t make too much money. He paid his employees well and sold everything at rock-bottom prices, but charged a small membership fee. The goal was to make sure people renewed because the money was in the membership fee.

Sol Price died in 2009, but 15 years later, the average Costco worker makes $26 an hour. And his formula for selling this and that indoors means everyday people walk in for necessities and walk out with 98-inch televisions.

The result — 70 years after this socialist set up his first warehouse, Costco has 134 million members. The membership fees that cost the company nothing bring in $5 billion. Remember buy for one, sell for two? Costco buys memberships for zero and sells them for 120 bucks. That’s what makes Costco an amazing business. And all this time you thought it was the $1.50 hot dogs.

Jeff Caplan is the host of Jeff Caplan’s Afternoon News on KSL NewsRadio. Follow him on Facebook and X. 

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