Costco wants to fill your tank before you grab the $1.50 hotdog

American retail giants are moving beyond groceries and snacks to pump more money into a space most shoppers might not expect: gas stations. 

According to Quartz, Dollar General, better known for $1 shampoo and canned beans than fuel, now operates more than 40 gas stations after first testing the format in 2013. BJ’s Wholesale Club added four new stations in the first quarter, bringing its total to 190. Walmart, meanwhile, plans to open 45 more stations this year, targeting over 450 locations by year-end, while sister brand Sam’s Club recently extended hours at most gas outlets.

But the original playbook comes from Costco — the quiet fuel giant of American retail.

Costco opened its first gas station in 1995. By the end of last year, it ran 719 worldwide — over 300 more than Walmart and up 3.4x from 2004. Now, with gas making up 12% of company revenues, Costco is fueling up even more: in February, it extended its gas station opening times nationwide, following that up by acquiring a shopping center in Arizona this month to expand a high-traffic fueling site.

In the competitive world of big-box retail, getting people in the door is often more than half the battle. And cheap fuel at warehouse clubs, where it can be as much as $0.30 lower per gallon than traditional stations, isn’t just a side hustle; it’s a traffic engine. When gas prices surged in 2021-22, Costco’s $0.20-per-gallon discount became a major draw, driving over half of its fuel-buying customers into the store, per its CFO.

Today, the economics are a little trickier. Gas prices are falling amid rising US crude output and OPEC+ supply bumps, squeezing retailers’ already razor-thin fuel margins. Earlier this month, Costco reported a 13.4% year-over-year drop in average gas prices, which dragged down its April same-store sales average.

Related reading: Gasoline is dead. Long live the hoagie.