Is Costco's standalone fuel station a new trend for membership-only cheap gas?

Costco Wholesale opened its first standalone, member-only gas station in Orange County, California. Located at 25732 El Paseo in Mission Viejo, facing the I-5 San Diego Freeway, the site features a 17,185-square-foot canopy with 40 fueling positions. No warehouse and no c-store is attached, but could this become a trend for membership-only cheap gas the likes of an Amazon Prime membership?

Fuel is not a loss leader for Costco, although the margin on gasoline is razor-thin. By offering prices significantly below the local average—in this case, roughly 71 cents cheaper than the Orange County average during grand opening—Costco incentivizes new memberships and encourages long-term loyalty among existing members.

Located just 3.5 miles away, the Laguna Niguel warehouse at 27972 Cabot Road is the closest Costco to the new Mission Viejo standalone gas station. Because both of the existing Laguna Niguel warehouses are already fully equipped with their own fuel stations, Costco's unique strategy in Mission Viejo wasn't driven by a lack of nearby fuel-equipped warehouses but rather as incremental exposure.

Costco has a second standalone gas station under development in Honolulu, projected to open in 2027, but future plans for a rollout of standalone fuel stations are sketchy.

Fuel is a major component of Costco's total business, consistently accounting for approximately 10% of total net sales.

The lowest priced annual membership that grants access to Costco’s fuel stations is the Gold Star Membership, which costs $65 per year. The average American driver uses approximately 490–530 gallons of gas per year. If a Costco warehouse club consistently undercuts competitors by even as low as $0.20 per gallon, the membership fee will likely pay for itself through fuel savings alone.

For motorists that are not typically Costco members, the savings on gas could generate a lot of income from new membership fees. If so, Costco could be at the cusp of becoming the low-cost gas provider in standalone stations, which could also add a smaller c-store component.

Neither Walmart nor BJ's Wholesale Club operates a network of standalone gas stations, except for one single Walmart gas station outside its corporate headquarters in Bentonville. If Costco's experiment pays off, it could spark a trend of other retailers adopting the membership-only fuel model.

Read more: Costco opens first standalone gas station (C-Store Dive)