It chose to earn less. And that's why it earns more.
The Costco paradox, in three operating rules that have worked for 40 years.
I've been obsessed with Costco for years. Not because of its products. Because of a contradiction I can't get out of my head: it's the most profitable retailer in the world, and it chose to charge less margin than it could.
They're the wizards of operational efficiency. And while most of retail gets more complicated — more SKUs, more promotions, more channels — they've spent 40 years doing exactly the opposite.
In the edition on the UF I said there are several levers to escape the Chilean retail equation. The first was productivity per square meter. Costco perfected it decades ago.
Three numbers I keep turning over
- It carries 3,800 SKUs per warehouse. Walmart carries 120,000. Costco sells more per store with less than 4% of the assortment.
- It has an almost religious internal rule: it won't charge more than a 14% margin over the supplier's cost. Voluntary. Self-imposed. And it still generates one of the highest returns in global retail.
- No loss leaders. Sol Price, the founder of the model, talked about the intelligent loss of sales — preferring to run out of a product rather than overstock it. If it doesn't turn, it doesn't come in.
There's an Acquired episode about all of this. If you work in retail and haven't heard it, stop what you're doing and give it two hours. Seriously.
When the denominator — rent indexed to the UF, labor costs on autopilot — rises on its own, you don't compete with a broad assortment. You compete with SKU discipline, depth per reference, and obsessive turnover.
Less assortment. Less margin. Zero loss leaders. And still, one of the most profitable retailers in the world.
I see it in the operation every day. And the more I look at our own assortment, the more it feels like Sol Price wrote the manual with Chilean retail in 2026 in mind.
Chilean retail doesn't have to invent the answer to the equation. It's been written for 40 years.