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By Hyunsoo Rim via Sherwood News <—- Click here for full article

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 DG $98.65 (-2.30%), 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 BJ $112.75 (-1.92%) added four new stations in the first quarter, bringing its total to 190. Walmart WMT $97.45 (-0.14%), 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 COST $1,017.74 (-0.00%) — 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.