Costco is famous for its low-cost food court. A whole pizza costs less than $10. And the company has built a cult following for its $1.50 hot dog and drink combo. But to access that cheap food (along with the rest of the warehouse chain’s specials), you need a membership. And, even then, you’ve historically needed to physically visit the warehouse and fight the crowds to get your meal.
A new startup is offering a way around that, but it’s going to cost you — a lot. A new service called No Tip will deliver Costco prepared foods to you, but you’ll need to brace yourself for a steep markup.
That hot dog combo, for instance? You’ll pay a total of $18, which works out to 1,100% more than someone who visited the store themselves. That $9.95 pizza? That’ll run you $28.
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The steep price increases are a blend of markups by the app (the $1.50 hot dog combo is priced at $3, for instance) and the $15 delivery fee, plus any taxes. The founder, though, is defending the prices.
Not aimed at individuals
No Tip, says Jack Chen, is designed as a catering service. While it’s happy to deliver individual orders, that’s not the company’s business plan. If, however, you’ve got an office party where you need several pizzas, the $15 delivery fee starts to look more attractive.
The company says it can handle orders for as many as 200 people — and it provides plates and forks as well.
No Tip was born when Chen, a software engineer, had a craving one night for Costco pizza, but didn’t feel like making the trip to the warehouse or dealing with the throng of people at the food court. Figuring he wasn’t the only person to experience this, he launched the business.
“I know my friends have paid, like, $30-plus dollars for some terrible Domino’s in the past,” he told SFGate. “So why not try to do this?”
The app currently only covers Southern California. Prices are all inclusive and, as you might guess by the name, drivers do not expect to be tipped.
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Retail’s best-known loss leader
Costco’s $1.50 hot dog is part of the store’s appeal for some people. The food court is a loss leader for the chain, but it draws people to stores, where they often buy additional items.
Costco’s CEO has vowed to never increase the price of the combo, saying it would remain at $1.50 “forever” on an earnings call in September 2022. It has held that price since the 1980s, while hot dog prices have continued to rise. In January 1980, the average price of a frankfurter was $1.68, according to the Bureau of Labor Statistics. By 2022, it was up to $5. (The BLS no longer tracks hot dog prices.)
That’s not to say the idea of increasing prices hasn’t been floated at Costco. CEO Craig Jelinek discussed concerns about the losses from the meal deal with founder and former CEO Jim Sinegal, at one point.
Sinegal, he told 425 Business, replied “If you raise the effing hot dog, I will kill you. Figure it out.”
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Chris Morris is a US based veteran journalist with more than 35 years of experience at many of the biggest digital news outlets. In addition to his activities as a writer, reporter and editor, Chris is also a frequent moderator and speaker at major conferences, including CES and South by Southwest.
