Why Costco loses money on its $4.99 chicken on purpose

Costco's rotisserie chicken has cost $4.99 since 2009, even as feed, fuel, and labor prices soared. The company has openly admitted it loses money on each bird — reportedly tens of millions of dollars a year — and yet it refuses to raise the price. That's not a mistake. It's a loss leader: a product sold at or below cost specifically to pull people through the door.

The logic is that the chicken is bait, not the meal. A shopper comes for the cheap bird but leaves with a cart of high-margin items — a rotisserie chicken sits at the back of the store, so you walk past electronics, clothing, and groceries to reach it. The tiny loss on one item is dwarfed by the profit on everything else in the basket.

For Costco there's a second layer: its real profit engine isn't retail markups at all — it's membership fees, which carry almost pure margin. Cheap staples like the $1.50 hot-dog combo and the $4.99 chicken exist to make a membership feel obviously worth renewing. The store happily loses a dollar on the chicken to protect a $65-a-year subscription.

The takeaway: a business will knowingly sell one thing below cost when that item changes customer behavior in a way that pays off elsewhere.