Thursday, June 13, 2024

One potential reason Costco’s Kirkland Signature products win over shoppers? The CEO signs off on every new item.

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Costco is well-known for offering jumbo sizes and low prices on the leading national brands.

But some customers are even more enthusiastic about a brand they can only get from its warehouse club: Kirkland Signature.

For nearly 30 years, Costco’s private-label brand has been winning the company some die-hard fans with products that are easily as good — or better — than their national-brand competitors, and priced as much as 20% less.

Whenever analysts would ask about shoppers “trading down” to the store brand, Costco’s former chief financial officer and avowed brand loyalist Richard Galanti would quickly correct them to say shoppers are “trading up” when it comes to Kirkland Signature.

Now spanning about 550 items across dozens of categories ranging from chicken to eyeglasses to golf clubs, Kirkland Signature has earned a level of consumer trust and loyalty that few brands ever achieve.

Galanti said in December that sales of Kirkland Signature merchandise reached about $56 billion last year, or nearly a quarter of Costco’s annual revenue. Including fuel, Costco attributes more than $80 billion to the brand.

One reason people may choose to stick with Kirkland? Costco is very selective about what it offers.

“We’re not looking to win a trophy for the highest amount of Kirkland Signature SKUs,” Claudine Adamo, Costco’s chief of operations for merchandising, told Fortune. “You build loyalty with that brand.”

Plus, all new products are thoroughly vetted before they ever see the sales floor.

“We don’t just put our name on products that someone else makes,” Adamo said. “Any new item goes all the way to the CEO’s office for sign-off.”

That reputation for quality, plus Costco’s generous return policy, make it easy for shoppers to try a Kirkland Signature offering — and come back for more.

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