Costco's $1.50 Hot Dog and Mixue's 40-Cent Cone Exemplify Enduring Loss Leader Strategy

The strategic retail practice of offering a product at a price point that yields little to no profit, known as a "loss leader," continues to be a potent tool for customer acquisition and brand loyalty. Two prominent examples, Costco's iconic $1.50 hot dog and soda combo and the rapidly expanding Chinese soft-serve chain Mixue's 40-cent ice cream cone, highlight this enduring business model. These seemingly unprofitable items serve as powerful magnets, drawing consumers into stores where they are likely to make additional, higher-margin purchases.

Costco's quarter-pound hot dog and 20-ounce soda combo has famously remained at $1.50 since 1985, a price point maintained despite decades of inflation that would otherwise push its cost to over $4.40 today. This unwavering commitment is a cornerstone of Costco's brand identity, with former CEO Craig Jelinek famously recounting co-founder Jim Sinegal's directive: "If you raise the effing hot dog, I will kill you. Figure it out." The warehouse giant leverages this low-priced offering to drive membership sales, which account for the bulk of its profits, and encourage bulk purchases within its stores.

Emerging as a new global phenomenon, China-based Mixue Bingcheng has rapidly expanded its footprint, particularly across Southeast Asia, with its signature soft-serve ice cream cone priced at approximately 40 US cents. Founded in 1997, Mixue has grown to operate over 45,000 stores worldwide, surpassing major fast-food chains like McDonald's and Starbucks in store count. The company achieves its ultra-low pricing through a highly efficient, vertically integrated supply chain, producing 60% of its ingredients in-house, and a low-cost franchise model that targets price-sensitive consumers in lower-tier cities.

Both Costco and Mixue exemplify the core principle of a loss leader: sacrificing immediate profit on a popular item to generate overall revenue and customer engagement. For Costco, the hot dog fosters a perception of unparalleled value, reinforcing membership benefits. For Mixue, the inexpensive soft-serve acts as an accessible entry point, encouraging customers to explore its wider range of bubble teas and other beverages. This strategy builds brand recognition and loyalty, ensuring a steady flow of customers who often spend more than the cost of the initial loss leader.