Ben Gilbert: belief

Transcript context

…Yeah. Actually, the purpose of the meeting was that Jeff wanted to pitch Jim. This was early days when they were expanding the categories on Amazon. There was a bunch of products that they couldn't get yet. They didn't have relationships with suppliers. Jeff wanted to pitch Jim on Costco selling on Amazon for the products that Amazon didn't carry yet. That didn't go too far. Jim gives him this masterclass on the Costco model. It sounds insane if you're not familiar with it from the outside, but then it makes total sense if you realize you're focused on gross margin dollars over the life of a customer, not percentage. The Costco model is more complicated than this. But essentially, they make 0% operating margin on their retail operations. They sell at such a low price. I think I looked into this when we were working on the Walmart episode, something like 5%–7% gross margin business. I think it's a little higher than that, but is basically set such that that when you take out the cost of running both the back end logistics and the warehouses themselves, they are making no profits on the actual retail business. All of the profits of the company come from the memberships, the annual memberships.…

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