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April 8, 2025
Why Haven’t Other Retailers Replicated Kirkland’s Success?
As Kirkland Signature marks its 30th anniversary, the private label has become a powerhouse, accounting for a third of Costco’s annual revenue — surpassing even industry giants like Procter & Gamble and Kraft Heinz. Given its success, why haven’t more retailers consolidated their store brands under a single name?
According to a videoed case study from the Wall Street Journal exploring Kirkland’s success, the only other major retailer employing a similar strategy is rival Sam’s Club, which consolidated its 20 proprietary brands into Member’s Mark in 2017.
WSJ’s case study pointed out that using a single name went against best practices at the time, illustrated by Sears’ success in hard lines with Kenmore, Craftsman, and DieHard but also the continued use of multiple labels across grocers, department stores, home improvement, and other channels.
Having multiple private labels enables retailers to tailor names to categories, such as Target’s use of Good & Gather for food & beverages, All in Motion for activewear, Cat & Jack for children’s apparel, and Brightroom for home organization.
One risk is that a bad experience with the brand in one category may cause the consumer to lose trust in the brand across categories. Claudine Adamo, Costco’s EVP and COO of merchandising, said in the video, “If they don’t trust the brand in the golf ball, they don’t trust the mixed nuts.”
The motivation to develop its own private label offering came after Jim Sinegal, co-founder and former CEO, read a 1991 Forbes article that showed Europeans were increasingly buying products manufactured directly by stores. At the time, national brands were increasing prices despite costs coming down to meet Wall Street’s demands for growth.
Costco’s move was designed to preserve margins. With its focus on value, Costco caps its markups at 14% for outside brands and 15% for store brands.
Costco initially developed a wide range of names for its private labels across categories. The decision to consolidate all of Costco’s private labels under the Kirkland name came after Sinegal found a warehouse manager who didn’t know a legal tablet the retailer was selling under the Pinnacle name came from Costco.
Sinegal said, “It was like a bell. Hell, if we don’t understand within the organization what we’re doing with our label, how are the customers going to? We decided we need to get one name.”
A single private label may be more appropriate for the warehouse club model supported by membership fees and limited assortments. Costco offers around 4,000 items in-store in contrast to 140,000 offered at other major retailers, according to Sinegal.
With only one or two brands per category, adding private labels created a fierce negotiating tool for Costco. National brands may be forced to reduce prices or upgrade the quality of their offering or be kicked off Costco’s shelves.
Sarah George, SVP of food merchandising, said in the video, “I think the limited-SKU environment is a very misunderstood or under-understood secret of a lot of things about Costco, including private label.”
Discussion Questions
Why does a single-brand, private-label focus work for Costco and apparently not for most other retailers?
Are there other aspects of Costco’s private-label approach that other retailers should copy?
Poll
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David Naumann
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First, of course we shouldn’t overlook the (very real IMO) possibility that Costco is simply a better run company.
Beyond that: a single name offers simplicity, and when you’re mostly selling something simple like paper towels or commoditized food like canned corn, that’s likely to overwhelm other concerns. But someone like macy*s – or even Target – that is trying to convince customers its own offerings are as good as a variety of branded products, often needs to go to great length to imitate those brands…artsy name and all. (Or it feels it needs to, anyway.) In short, there’s a great deal of psychology involved. Is it contrived? Sure. Is it 100% logical? Probably not. But it isn’t supposed to be…it’s retail!
Works for TJ’s. Both deliver consistently to a brand promise and do it over the long term. Others just flail around with short term alterations to an ill-defined private label strategy.
Good point Peter! Trader Joe’s is another example of a very successful private label brand that has a loyal fan base. One of the biggest keys to success for these private label brands is the obsession with quality that consumers become to trust. In the “olden days,” some consumers were embarrassed if their friends knew you purchased private label brands. Now, we’re proud of our Kirkland and Trader Joe’s branded products.
In contrast to Costco, other retailers may have trouble establishing brand loyalty and customer trust through their single-brand, private-label focus due to their lack of established brand loyalty and customer trust.
A further challenge they often encounter is maintaining consistent product quality and competitive pricing, which are essential for the success of this strategy.
Furthermore, retailers without a strong customer base or a unique value proposition may have difficulty competing against well-known national brands.
It is possible for other retailers to emulate Costco’s use of limited-time offers and exclusive products in order to create a sense of urgency and exclusivity among consumers.
In addition, Costco’s commitment to quality over quantity, along with a carefully curated selection of products, contributes to maintaining customer confidence and satisfaction.
To conclude, membership models can enhance customer loyalty by creating a sense of belonging and community.
Costco has turned the owned brand playbook on its ear. While its competitors in grocery and CPG are creating multiple owned brand lines to create differentiation and targeted focus, Costco is leveraging the fact that their entire store and organization are a single brand. Granted, this concept may not be the perfect solution for everyone. However, watching big boxes cycle through the process of introducing and retiring their owned brand labels every few years to convince customers that new is better, at the same time, is confusing and, in many cases, dilutes their brand, shortening their lifecycle even more.
Costco must do constant analysis on what sells, attractive price points, then applies undeniable quality to the products and, presto, you have a successful private label brand. The Kirkland brand quality is not by any means diluted just because it is private label. In fact, in many cases I have experienced, the Kirkland brand product is as good or better, than nationally advertised brands. Ironically, private labels are not advertised yet Kirkland is the largest private label brand anywhere at an estimated $86 B!.
Costco has a huge advantage starting at the very beginning of the product development and curation process. They deal in best sellers. Absolute, proven best sellers. Brands don’t go to Costco with experiments or tertiary excess items. All Costco wants to talk about is proven best sellers. Now make a proven best seller with the best quality and best value that can be made. Best. Kirkland’s Brand Promise is Best. And shoppers now know that. So when a shopper comes across a Kirkland item, in any product category, they have found the best quality/value item they will find in that category. Mission accomplished.
Jeff, I agree with your assessment. I will add that the process you describe begins with the Costco brand being highly trusted. Customers expect excellence from Costco and Costco delivers. Whether Kirkland or any other product in the store. Second best isn’t in the Costco mix.
A few things really jump out at me about Costco’s success. First off, I think they absolutely nailed it with consolidating everything under one brand name known for solid quality (sometimes even better than the big brands in my own experience!) I also think it is a smart move to keep the selection tight. It makes things simple and gives them more clout when negotiating with suppliers. And the membership model creates a loyal community feel that keeps people coming back. More broadly, it’s a well-run company.