Costco is selling gasoline and even Medicare plans. Here’s why it’s expanding into those markets.
| From the desk of Miles Everson: Hi! I hope you’re doing well. I’m thrilled to share another useful insight for today’s “Return Driven Strategy (RDS)!” For those of you who may not know, RDS is a pyramid-shaped framework with 11 tenets and 3 foundations. When applied properly, these concepts help businesses and individuals achieve their goals. In this article, we will put the spotlight on retail giant Costco. Want to know why? Keep reading below! |
Costco has, and continues to be, one of America’s biggest retailers alongside Walmart . Costco is primarily known for its hotdog meal that costs USD 1.50. In fact, the company sold roughly 245 million of those in 2025. Aside from hotdogs, it also sells pizza, pastries, and dessert items. That said, the company didn’t become an empire just by selling cheap, ready-to-eat meals to shoppers. Founded in 1983, the company transformed itself into a retail giant by leveraging a warehouse- and membership-only model. Costco’s customer acquisition strategy also included offering shoppers bulk deals, providing razor-think markups, and giving buyers lower prices. Today, it serves millions of members across the globe while generating an annual revenue of over USD 280 billion (as of its 2025 fiscal year). BUT! While Costco built its empire by selling good food and quality goods at affordable prices, it’s no longer just limited to those offerings. A Rapidly-Expanding Retail Juggernaut
Costco is more than just a haven for shoppers looking for affordable meals and bargains for their groceries and other needs. The retail giant also sells travel packages and recently, gasoline and medicare plans. Costco Travel was established 25 years ago. While it doesn’t yet have the brand recognition that other travel agencies enjoy, it is by no means a small player. It has over 800 in-house agents, 13 buyers, and five call centers. Costco members even booked over USD 100 million in travel in the span of five days after Thanksgiving in 2025. Cosco’s travel arm is just as selective in its offerings. Airline tickets are sold only as part of a package, and not every airline is included. Meanwhile, vacation packages in Hawaii, the Caribbean, Mexico, Florida, Las Vegas, and others can be bought and booked, but are available only in selected resorts. Costco opened its first standalone gasoline station in Mission Viejo, California in July 2026. The gas station has 40 fueling stations and is exclusive to Costco members. It sells gasoline at a discount compared to its competitors. Now, the retail giant is making inroads in the Medicare market. It recently announced its plans to roll out Costco-branded Medicare plans together with its partner nonprofit insurer, the SCAN Group . Costco and SCAN Group plan to sell their Medicare Advantage products in two states and a Medicare supplement in another. These businesses make it evident that Costco is expanding the market it caters to. Now, the question is, WHY is it doing so? That question is best answered through the lens of Return Driven Strategy ’s (RDS) second tenet: Fulfill Otherwise Unmet Customer Needs . According to Professor Joel Litman and Dr. Mark L. Frigo in the book, “Driven” : “Some of the firms with the highest revenues and cash flow returns are those that have created a series of offerings that have no substitute and target great pains being felt by customers.” Costco’s expansion in travel, retail gas, and Medicare reflects its efforts to become a one-stop shop for the needs and wants of its customer base. By expanding its offerings to customer essentials, the retail behemoth is attempting to provide more value to its members while boosting its sales further in the process. As mentioned in RDS’ second tenet, firms that generate high levels of revenue are those that provide the unmet needs of its customers. Seen in this context, Costco’s expansion into markets it’s not typically associated with isn’t just a random choice; it’s a return-driven tactic that’s designed to fulfill the needs of its loyal customers. — If you’re looking to gain a better understanding of Return Driven Strategy and Career Driven Strategy, we highly recommend checking out “Driven” by Professor Litman and Dr. Frigo. Click here to get your copy and learn how this framework can help you in your business strategies and ultimately, in ethically maximizing wealth for your firm. Hope you found this week’s insights interesting and helpful. Stay tuned for next Tuesday’s Return Driven Strategy! Imagine walking into a company that seems unstoppable… Learn more about the Enron scandal through the lens of RDS in next week’s article! |
Miles Everson
CEO of MBO Partners and former Global Advisory and Consulting CEO at PwC, Everson has worked with many of the world's largest and most prominent organizations, specializing in executive management. He helps companies balance growth, reduce risk, maximize return, and excel in strategic business priorities.
He is a sought-after public speaker and contributor and has been a case study for success from Harvard Business School.
Everson is a Certified Public Accountant, a member of the American Institute of Certified Public Accountants and Minnesota Society of Certified Public Accountants. He graduated from St. Cloud State University with a B.S. in Accounting.
