Why BJ’s Makes More per Dollar Than Costco but Keeps Less

Today, I’m digging into BJ’s Wholesale Club (BJ).

This is a membership warehouse business that leans hard into groceries and weekly shopping, not just big bulk trips. BJ’s doesn’t get talked about as much as Costco, but they offer an interesting point of comparison.

A few things that stood out to me:

• Grocery-first positioning: BJ’s is built around food and household staples. That drives more frequent visits than the classic “once-a-month stock-up” warehouse trip.

• Higher gross margin than Costco: BJ’s runs gross margins around ~18% versus Costco closer to ~11%. They make more per dollar sold.

• Similar operating margin to Costco: Despite the higher gross margin, BJ’s operating margin ends up in the same ~3%–4% range. Operating costs eat up the difference. There's likely another explanation. See the Finance section below for more.

• Membership fees still matter: Fees are a small part of revenue but a big part of profit stability. Renewals are strong, which keeps the model working.

• Gas and coupons drive traffic: These pull people in regularly, but they also add complexity at checkout and in operations. If you use incentives to pull in new customers. You need to constantly be tweaking your onboarding and activation to try to drive higher retention.

One clear negative:

• More complexity, higher cost: Grocery-heavy assortments, coupons, and promotions make BJ’s harder to run efficiently than Costco. When margins are thin, that complexity can ding profitability quickly.

It's easy to look at what Costco does and say that BJ's could reduce their complexity if they implemented more of Costco's strategies. But Costco already has the scale to drive crazy high volume for its suppliers, and that's just not something you can replicate overnight.

When looking at companies in your industry or companies in another industry, it's always fun to try to find a few comparable companies to look at from a product mix, marketing, and financial standpoint. This is a prime example of that.

With that, I'll see you tomorrow.

Nick

TL;DR

• BJ’s runs a membership-based warehouse club model focused on groceries, household staples, and gas, optimized for weekly shopping habits.

• The business works on razor-thin retail margins, then stacks high-margin membership fees, scale purchasing, and operational discipline on top.

• Its real advantage is habit-building: groceries + gas + coupons + digital convenience keep families coming back.

• Entrepreneurs should study how BJ’s monetizes routine, not novelty, and how small process gains compound at scale.

• The downside is fragility: when margins are thin, labor, shrink, or expansion mistakes surface fast.

The 30,000-Foot View

BJ’s Wholesale Club operates large-format warehouse clubs concentrated in the eastern U.S. The company sells food, consumables, general merchandise, and gasoline to paid members, positioning itself as a grocery-first warehouse club rather than a discretionary bulk retailer.

Business model

• Annual memberships provide predictable, high-margin revenue.

• Merchandise and gasoline sales drive volume and customer frequency.

• Scale purchasing and tight cost control are essential to profitability.

Revenue mix

• Net sales: ~97.8% of total revenue.

• Membership fees: ~2.2% of revenue but a disproportionately large share of operating profit.

• Within net sales:

  • Perishables, grocery, sundries: 72%.

  • Gasoline and other: 18%.

  • General merchandise and services: 10%.

Key stats

• Market cap: $12.0B.

• TTM revenue: $21.2B.

• TTM gross margin: 18.6%.

• TTM operating income: $0.82B.

• TTM net income: $0.58B.

• Employees: ~33,000.

• Clubs: ~256 warehouse clubs with ~190 gas stations.

• Industry: Warehouse clubs and supercenters.

Company History

• 1984: BJ’s warehouse club concept launches in New England.

• 2011: Acquired by Leonard Green & Partners and CVC Capital Partners in a ~$2.8B take-private deal.

• 2018: Returns to public markets with an IPO at $17 per share.

• 2021: Bob Eddy appointed CEO, signaling a renewed focus on operations and disciplined growth.

• 2023: CEO also assumes Chairman role, consolidating leadership.

• 2024-2025: Continued expansion of clubs, refreshed membership tiers, and heavier investment in digital and AI-enabled operations.

The N.O.O.B. Nine — Competitive Powers

The Nerd Out on Business Nine is made up of Hamliton Helmer's famous "7 Powers" of competitive advantage (Scale Economies, Network Economies, Counter-Positioning, Switching Costs, Branding, Cornered Resource, and Process Power) combined with two of my own (Data Flywheel and Distribution Advantage).

Average Score: 3/5 - A solid, execution-driven moat that depends on operational excellence rather than structural dominance.

Memorable Marketing

BJ’s marketing emphasizes value, routine, and simplicity rather than flash. The brand voice is practical, savings-focused, and family-oriented, with an emphasis on groceries and everyday essentials.

Standout tactics

• Grocery-first positioning

  • Core idea: Cheaper groceries, every week.

  • Channel mix: TV, digital, in-club signage.

  • Why it worked: Anchors BJ’s in a high-frequency habit.

• Manufacturer coupon acceptance

  • Core idea: Stack savings in a way competitors do not.

  • Channel mix: Brand advertising and direct messaging.

  • Why it worked: Clear differentiation for value-focused shoppers.

• Low-cost first-year memberships

  • Core idea: Make joining an impulse decision.

  • Channel mix: Local launches and digital acquisition.

  • Why it worked: Reduces trial friction in new markets.

Tactical takeaways

1. Lead with the weekly job you win, not the full catalog.

2. Use aggressive trial pricing when lifetime value is driven by renewal.

3. Make savings emotional and simple, not transactional.

4. Localize acquisition around physical expansion.

AI Uses & Opportunities

Current uses

• AI-powered store monitoring and inventory visibility.

• Early-stage AI shopping assistants and personalized lists.

• Predictive models in supply chain and demand forecasting.

Future opportunities

• Shrink reduction using computer vision focused on top-loss SKUs.

• Personalized stock-up planning tied to household cadence.

• Labor scheduling that integrates weather, seasonality, and promotions.

• Data-driven supplier insights sold as a service.

Bumps in the Road

• Historical data security and regulatory issues highlight operational risk.

• Legal settlements have periodically distorted year-over-year results.

• Gasoline revenue complicates growth optics.

• Expansion increases exposure to labor and occupancy cost inflation.

• Thin margins leave little room for execution errors.

Your Swipe File

• Subscription-like revenue layers can stabilize low-margin businesses.

• Process discipline is key when margins are thin.

• Separate revenue growth from profit growth in volatile categories.

• Avoid over-reliance on promotions without a solid grasp on retention (and optimized onboarding/activation).