A number of things set Costco apart from its competitors. One is the sheer size of the typical Costco warehouse. It’s an experience very different from walking into a traditional store. Even the shopping carts are supersized.
Another key difference is Costco’s ongoing commitment to value.
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There’s a reason Costco only stocks about 4,000 SKUs (stock keeping units) while its competitors commonly house 30,000 or more on their shelves.
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It isn’t that Costco can’t source new products or engage with new suppliers. Rather, Costco intentionally limits its inventory because it wants to ensure that every product it sells is high in quality.
Of course, price is a factor, too. Costco won’t sell an item whose price it isn’t happy with. But at Costco, quality is paramount.
Costco’s Kirkland brand fails in key category.
Image source: Tim Boyle/Getty Images
Costco’s Kirkland brand is synonymous with quality
Another thing that sets Costco apart from competitors is the success of its Kirkland brand.
Kirkland products account for one-third of Costco’s sales. And that number could increase as the company seeks to expand the private label.
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One thing Costco has done right with regard to Kirkland is house all of its products under the same name. Competitors like Target have tried introducing different private label brands for differentiation. But Costco’s approach has long been to establish trust among consumers with a single brand and run with it.
These days, customers will find the Kirkland label on everything from snacks to paper products to household cleaners. But thanks to the brand’s solid reputation, it’s able to drive strong sales for Costco.
When members bring home a Kirkland product, they’re reassured that they’re getting a high-quality item. And if not, they know they can return it for a refund, no questions asked.
The one area Kirkland has yet to crack
The Kirkland brand has expanded since its inception, hitting numerous aisles within Costco’s mammoth stores. But there’s one specific area where Kirkland has yet to find success.
In a recent Wall Street Journal interview, CEO Ron Vachris shared that Costco won’t release a Kirkland version of a given product if it feels it can’t match what the national brands are doing in terms of not just price, but also quality.
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To that end, Costco has long struggled to produce electronics under its own brand name.
“Consumer electronics has been one that we’ve always looked at and said, ‘I would love to get into that.’ And we have not yet been successful in trying to find something in that category that we’ve really been able to stay with and continue to grow,” said Vachris.
Consumers are often tempted to buy electronics at Costco not only because of the company’s competitive prices, but also due to its generous return policy.
It’s common for retailers to impose a 30-day limit on returns for electronics. But at Costco, purchases like TVs and laptops come with a 90-day return window.
Costco also offers free tech support on electronics purchases, and many items come with an added warranty.
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Expanding into electronics could really propel the Kirkland brand and drive revenue for Costco. And it could also give members a wider range of affordable priced electronics to choose from.
But Vachris has good news for consumers who are hoping to one day bring home a 100-inch Kirkland TV.
“We’re not going to give up on it,” he said.
Once Costco finds a way to produce high-quality electronics at a price that offers a notable discount from national brands, members can bet on seeing those items start to pop up in their local warehouse club stores.
Maurie Backman owns shares of Costco.
