Why Costco’s $1.50 Hot Dog Combo Still Exists — And Why It’s Brilliant Business

Costco’s $1.50 hot dog and soda combo is more than a fan favorite — it’s a brilliant piece of retail strategy. The price has remained the same since 1985, even though inflation has pushed the real value of the deal closer to $4.50 today. That means Costco is losing money with every sale — and they’re completely fine with it.

This type of pricing is known as a loss leader, a deal so good it draws customers into the store, where they typically end up buying far more than planned. The tactic is clearly working. In 2024, the average Costco shopper spent 37.3 minutes inside the store — significantly longer than shoppers at Walmart (31.8 minutes) or Target (28.7 minutes)...

Costco’s business model relies on volume and membership. While most retailers make profits by marking up items, Costco keeps prices low, averaging only about a 3% profit margin on merchandise. Instead, its revenue comes from memberships. In 2024 alone, Costco brought in nearly $5 billion from membership fees, up significantly from previous years. For comparison, Sam’s Club earned $3.1 billion in fees that same year.

In 2024, Costco raised its membership fees for the first time in seven years — and barely anyone blinked.

But it's not just about low prices and hot dogs. Costco meticulously curates its product lineup, only offering items that pass a high standard. If something doesn’t meet the mark, they make it themselves — as seen with their famously high-quality rotisserie chicken, produced entirely in-house.

Costco’s commitment to value also extends to its employees. The company pays above-industry wages (starting at $20/hour, averaging $31/hour) and has committed to ongoing pay increases. Rather than spending heavily on advertising, Costco lets its loyal customer base spread the word.

Even Wall Street has taken notice. Over the past decade, Costco stock has returned 663%, nearly triple the performance of the S&P 500.

Costco proves that long-term thinking, strong values, and a really good hot dog can build not just a loyal customer base — but a retail empire.

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