@Open123 wrote:
From what I know of Costco's negotiating power as America's preeminent wholesaler, I'd hate to be one of their suppliers. I've been told their terms are extremely one side where vendor/supplier basically accepts Costco's terms.
I doubt Amex was making much on the swipe fees for purchases made at Costco (hence, the Costco card earning only 1%), but the marketing opportunity was purely for Costco customers using the card elsewhere. Likewise, I doubt Citi will make much from swipe fees used at Costco, which, similar to Amex, the best card to use at Costco will be a Visa other than the cobranded Citi one.
In the long run, I don't think this really hurts Amex nearly as much as people think.
Personally I think AmEx is taking a prettty good hit off this and refusing to bend their tried and true business model to accept competitive rates. Much of AmEx's image is ego-stroking in my opinion with an example being that I doubt 50% of the members that pay $450 a year for "Platinum status" actually see much benefit from the card other than the ersatz "status factor" (I admit to having a bias against AmEx, but that does not mean I'm wrong). Compete or die in business and charging higher swip fees and AF's on cards gets old school after a while - I think Costco saw how much they were paying AmEx and said we need to talk - AmEx said we are not MC/V, we are worth the extra fees and Costco said not to us you aren't. The warning shot was pulling out of Canada, AmEx didn't budge, Costco said got along without ya before I met ya get along without ya now....
It'll be interesting to watch their (AmEx) future SEC filings to see how much of a hit they take in profits and gross sales once they lose Canada and then the USA Costco business. SEC filings are very useful in getting the real story, not just in this case, but following a lot of business rumors verses the truth.
Case in point in late 2013 and early 2014 there was a big story about an "ammo shortage" and the theroy was that the government was buying up all the ammo to keep it out of the public's hands (supply chain). One of the things I do is chase down this kind of thing and answer the public concerns (not directly, but research and conclusions). What was happening was all sporting stores were experiencing shortages of ammo (all kinds) and prices were going way up because of supply and demand.
Best source of information was the SEC filings of ammo manufactures for both military and public supply, which showed deliveries, (numbers, volume and production) of both military and cillvilan suply chains and projections for current production meeting demand now and looking forward. Bottom line was there was no spike in production nor any shortage of manufacturing capacity and projections were for decreased demand over the next couple of years. The actual shortage was caused by the self generated rumor and panic caused by the media attention to spot shortages which mushroomed - basically over now, but the higher prices mostly stayed.
SEC filings are a great source of information if you can weed through all the public relations spin in there - also kind of dry reading - the AmEx volume and profit margins will show up in their quaterly and annual SEC filings - should be interesting.
