For a hot dog and beverage, Costco has charged $1.50 for 37 years, and inflation won't change that. According to analysts, the cost of Costco's hot dog combo is a reflection of their business strategy.
The shop is praised by Charlie Munger for consistently lowering prices without compromising quality.
For almost four decades, Costco has insisted on charging $1.50 for its hot dog and drink combo. Despite the fact that US inflation has reached a 40-year high, Costco has no plans to increase that price.
Investors like Charlie Munger, Warren Buffett's business partner and vice-chairman of Berkshire Hathaway, have praised the big-box retailer for its commitment to cost-cutting without compromising quality and passing those savings through to customers in the form of cheaper prices.
With its hot dog and Coke promotion, Costco presumably makes little to no money, but the promotion draws people in and possibly generates more sales.
Costco derives almost all of its income from membership fees, which enables it to keep some products, like the hot dog combo, at incredibly low costs.
According to him, the method encourages brand loyalty, creates free publicity, and encourages membership signups. Additionally, it fosters consumer loyalty at a time when nearly all goods and services outside of Costco are becoming more expensive.
Despite losing money on each of the 130 million (and growing) annual combo sales, the $1.50 combo is so ingrained in Costco's culture that it promotes trust and loyalty.