On Monday, November 24, 2014 7:05:15 PM UTC-5, sms wrote:
On 11/18/2014 2:28 PM, Tekkie® wrote:

snip

There is NO "free benefit"! The customer pays for EVERYTHING. A business
must make a profit to survive. I don't know Costco's business model on tires
but it may a selling point that costs then very little in the volume they
do. Ask Claire, he will tell you they had a price structure they followed
and the only thing that wasn't figured in was rework. But that was included
in the labor charges and/or tech agreements.

Costco, or any store, determines prices based on what generates the
maximum revenue, not on what it actually costs them to provide a product
or service.

The mistake that many people make is to assume that the cost of the
included nitrogen is a line item in their price calculation of what to
charge for tires. Retail doesn't work that way, for better or worse.
They also include valve stems on non-TPMS tires instead of charging
extra for it as many tire stores do--$2 for a 10¢ item. Costco is not
going to lower the price of a tire by 10¢ if a customer declines the
nitrogen.

Costco's tiny cost for nitrogen is almost certainly offset by savings in
labor and warranty costs so if anything they should charge extra to
customers that don't want nitrogen.

You keep making this claim that the cost of nitrogen is offset in labor
and warranty costs, without a shred of supporting evidence. The only
actual real world data that I've seen is a test by Consumer Reports that
showed that tires that were purged of all air, then filled with N, had
a tire pressure difference that was about 1 PSI higher over the same
tires filled with regular air, a year later. It's hard to see how that translates into labor and warranty savings at Costco, or anywhere else.

And I don't think the poster is saying that the customer specifically pays
for Costco's costs on a line item, buy line item basis. But if Costco's
costs do get paid for by consumers, one way or another.