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Business model: Most Costco members don't shop at Costco all that much In many ways, its business model isn't what you think it is. Daniel B. Kline | The Motley Fool Show Caption Hide Caption This new Costco hack gets you into the club without paying With their exclusive offers and membership fees, some grocery stores seem more like a New York nightclub. If you don’t know someone on the inside, you’re not getting in. Josh King has the story (@abridgetoland). Costco (NASDAQ: COST) markets itself as a warehouse club where, in exchange for a membership fee, consumers get access to a variety of food, merchandise and services at discounted prices. Of course, the company does offer those things, but that's not really the chain's business model. In many ways, Costco operates like a gym. It sells memberships knowing that many of its members won't show up. It's not upset if they do — and it takes care of its members who spend the most — but, in reality, it only needs customers to see the value of joining, not actually have them do any shopping. How does the gym model work? Discount gym chains such as Planet Fitness (NYSE: PLNT) actually market to people the company knows won't show up. That's why the chain's average gym has 6,500 members while only about 300 could be accommodated at any given time, NPR's All Things Considered reported in December 2014. Essentially, when many people join a gym, they do so with the best of intentions. They want to be healthier and get into better shape. Even as they rarely or never go, they stay members because the idea that they will someday become regulars. The gym doesn't need to serve that audience. Instead, it can focus on a smaller group of dedicated customers who work out most days and keep them happy, while also showing less engaged members that the whole enterprise does work, which keeps them from quitting. Costco's business works the same way. Members are lured in by the prospect of saving money, and even if they don't take advantage, they renew because they intend to in the future. The chain makes about 75% of its profits from membership fees, and a big piece of the remaining 25% comes from its best customers who spend much more than the average member. Like a gym, the warehouse club makes money whether people come in or not, and its sales are just icing on the cake. More: Toys R Us may file for bankruptcy before the holidays: Report More: Future of payments: Are digital wallets doomed to fail? More: Report: Walgreens' deal to buy half of Rite Aid's stores near approval How does Costco make its money? The chain uses low prices to entice people to pay either $60 for its basic "Gold Star" membership or $120 for an Executive membership, which gives members 2% cash back on eligible purchases until they earn $1,000 back. Either membership gets people in the