Why Kirkland is Costco's Source of Success

The Costco brand, Kirkland Signature, is more than you think.

Фото: Depositphotos

Last year, he earned nearly 40 billion dollars, which is 11% more than in 2017 year. It's more than JCPenney and Macy's put together, writes CNN.

The Kirkland brand, which Costco sells at least 20% cheaper than other brands, helps the network to keep prices low even for products it does not produce.

Costco is one of America’s largest retailers, but there are only 3800 products for sale in its stores. Big brands do not want to risk being represented on the shelves of Costco, because this often leads to the need to reduce prices.

For example, last year Costco lowered the price of Kirkland water bottle packs to 2,99 dollars. This move has forced other brands, such as Poland Springs, to follow their example.

Last year, Costco also introduced the Kirkland triple blade razor, after many years selling Gillette blades at higher prices. She also recently began selling a nut spread, weighing 35 ounces, which could put pressure on Ferrero. In addition, the network has its own bars with coconuts and nuts Vita Coco and Kind Bar, which are also sold at competitive prices.

Such Costco actions create problems for other brands, because they have to lower prices in the competitive struggle for the buyer.

This is a win for Costco. However, for brands, Kirkland products may threaten their sales and undermine pricing.

Boom kirkland

Kirkland's 24-year-old brand is a valuable asset to Costco, in order to attract customers to the store and encourage people to pay for Costco membership at a cost of 60 and 120 dollars per year.

In 1995, Costco (COST) transferred all its own brand lines to the brand Kirkland, which is named after the city where Costco’s main office is located: Kirkland, Washington.

"I don't think at the beginning of this process, in the early 1990s, we thought that almost a third of our business would be dependent on this brand," said Costco Chief Financial Officer Richard Galanti.

Although Kirkland is more successful than its own brands from many of its Costco competitors, the network strategy carries certain risks.

Because Costco offers a limited selection of products, it has less room for error within the brand, otherwise sales will suffer. For example, Costco stopped producing its own soda Kirkland, realizing that "no one is looking for a third large Coke."

But mainly Kirkland helps to strengthen Costco’s reputation for selling online merchandise. Buyers are attracted to everyday Kirkland goods, such as toilet paper, cheap bottled water and nuts, as well as such things as golf balls and wine.

In addition, Kirkland helps Costco control costs in the supply chain. For example, when Costco changed Kirkland's cashew cans from round to square on 2014, according to Costco Connection, she was able to load more cans into trucks and storage racks.

The rivals took note of Kirkland's success, and Costco faced new competition from its own store brands.

Aldi's supermarket chain is gaining popularity in the United States, and at the same time it is highly dependent on its own brands. Trader Joe's also has a strategy similar to Costco.

Amazon is actively expanding its range to expand its selection and gain an edge over large stores.

Costco also faces pressure from Walmart, which is investing in improving its own brands.

Therefore, many networks rely on unique products that will conquer customers with convenience or exclusivity.

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