With an industry-defying 14% maximum markup policy in 2023, Walmart, Target, and Amazon envy their success. Here's the full story behind Costco—the most disciplined margin business at scale.

In 1983, when Sol Price mentored a young Costco founder Jim Sinegal, he shared a retail philosophy that would sound insane to most MBAs: "If you recognize you're making too much money, you should give it back to the customers."

Four decades later, this counterintuitive principle has created one of the most financially successful retail operations in history.

While every business school teaches "maximize margins," Costco deliberately caps theirs at 14%—compared to typical retailer markups of 25-40%.

Their financial discipline borders on obsession:

• Executive management operates from a bare-bones headquarters

• The CEO works from a regular desk in an open office

• They spend effectively $0 on traditional advertising

This isn't about being cheap—it's philosophical consistency. Every dollar not spent on corporate excess can be returned to customers through lower prices.

The result? Costco's memberships have become a license to print money. While they generate razor-thin product margins, their $4.6B in annual membership fees flow directly to the bottom line at 70% profit margins.

When you pass through Costco's no-frills entrance next time, remember: you're experiencing capitalism's most elegant paradox—a company that grows more powerful by deliberately making less money on each sale.