Costco sells a rotisserie chicken for $4.99. It has cost $4.99 for years. Their former CFO admitted they give up $30 to $40 million a year in margin to keep it there. They sell 157 million of those birds a year.
Why would any business do that? Because the chicken is not the business. The cart is.
Nobody drives to Costco for one chicken. You go for the chicken and leave with $200 of other things — the things with real margins. The chicken is bait, priced to pull you through the door.
This game has a name: the loss leader. Sell one thing at a loss, or near it, and make it back on everything around it.
Everyone tells the Gillette version — cheap razors, expensive blades. Fun story, mostly legend. The real Gillette razor cost $5 in 1903, a third of a working man’s weekly wage. The cheap-handle game only showed up after the patents expired.
The lesson is not about chickens or razors. It is this: figure out what pulls people in, and be willing to lose money on exactly that. The profit lives one step behind the bait.