Costco’s Kirkland Signature house brand brought in more than $59 billion in sales in 2021. That’s up from $52 billion from the year before. When the membership-only warehouse retailer published those figures in its 2021 annual report, a slew of articles and analyses followed, asking how and why Kirkland Signature has done so darn well—including a piece in RetailWire with a headline that asked that very question, bluntly: “Why Has Kirkland Signature Been So Successful?”
The answer seems to be just as straightforward as the headline: Costco puts the Kirkland Signature name on an essentially endless variety of high-quality, cost-effective products. These items include vodka, cage-free eggs, shrimp, dress shirts, men’s jeans, moisturizing shampoo, vitamins to help eyes stay healthy, a golf wedge set, a 3-pound bag of walnuts, non-stick pans, flushable wipes, latex-free gloves, branded baseball hats, stool softener, food for small dogs, charcuterie cutting tools, laundry detergent, ground coffee, diapers, and hair regrowth treatment. And that’s just the list that comes up on the first page of Google results.
The idea for Kirkland Signature goes back about 30 years. Jim Sinegal, Costco’s co-founder and then-CEO, read a story in Forbes magazine about the increasing consumer appeal of private-label or house brands. According to the brand history, Sinegal underlined key passages—one said that consumers had only just started purchasing such house brands, and another that promised “the trend so far is only a trickle but it shows signs of growing fairly rapidly”—then sent the article around for his employees to read and act on.
The Kirkland Signature label—the name pays tribute to the place where Costco was then located, in Washington State—officially launched in 1995. Costco was growing rapidly at the time, both in the United States and abroad. The company did not want to mess around with too many complicated trademark filings all over the world, so it decided to stick with just the one name for all in-house products: Kirkland Select, which grew right alongside Costco. Its explicit aim was to provide a huge array of goods, at 15–20 percent lower prices than those charged by comparable, big-name alternatives. Notably, sometimes the big names producing those alternatives would even make the Kirkland Signature version for Costco, as in the example of Starbucks’ Kirkland Signature Medium Roast Coffee Beans.
Today the products are so popular that they are more than just the preferred versions among available brands. They give customers sufficient incentive to pay the $60–$120 annual fee to join Costco and gain access to its latest and greatest introductions. Every couple of months, media reports highlight the newest Kirkland Signature product that has achieved “cult status.” Aged balsamic vinegar, animal crackers, wild-caught mahi-mahi, sliced bacon and bacon crumbles got lots of praise. And how about the six-pack of white tees, to appealing it led one enthusiast to proclaim their “quality is insane. It sh*ts on Hanes.” How many other grocery retailers can get shoppers to (literally) swear their love for their products?
In its annual filings, Costco chalks a lot of Kirkland Signature’s success, and customers’ loyalty, to “maintaining consistent product quality, competitive pricing, and availability.” But it is also carefully strategic in its efforts to cull low-performing products, then only sell those products in Costco stores. Good luck getting your favorite Kirkland Signature mahi-mahi from Target or Amazon.
Or perhaps an even more simple answer can explain Kirkland Signature’s phenomenal success. At least of late, it has been a very hard time for most consumers, and in this deeply uncertain and difficult environment, people have become ever more conscious about where their dollars are going and ever more desiring of reassurances that the products they purchase will be satisfying. Costco membership ranks grew to 113 million during the pandemic, up from 98.5 million in 2019. That’s a lot of people who just want some well-priced, good quality t-shirts, and maybe a charcuterie board, to get through their week.
Discussion Questions:
- Why is Kirkland Signature such a success for Costco?
- Could other companies replicate this success with their own house brands?
- What would you advise Costco to do if it wanted to sell even more Kirkland Signature products? How could it undertake a product line extension?
Source: Tom Ryan, “Why Has Kirkland Signature Been So Successful?” RetailWire, February 15, 2022; Nathaniel Meyersohn, “Why Every Costco Product Is Called ‘Kirkland Signature’,” CNN Business, February 5, 2022; Brianna Wellen; “27 Years Ago, Costco Made One Hell of a Smart Business Decision,” The Takeout, February 7, 2022; Nathaniel Meyersohn, “How Kirkland Signature Powers Costco’s Success,” CNN, January 10, 2019; Joey Skladany, “10 Budget-Friendly Costco Products with Cult Followings,” Food52, March 3, 2022; Joseph Longo, “The Cult of the Costco Kirkland Signature Tee,” Mel Magazine, August 7, 2020