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Shoppers love Costco's Kirkland Signature brand, and it's turned into the retailer's biggest asset (COST)

Obama in costco
  • Sales of Costco 's Kirkland Signature private-label brand grew to $39 billion in 2018, up from $35 billion the previous year, the retailer reported in December.
  • That represents an increase of more than 10%, slightly outpacing sales growth for the retailer as a whole.
  • Kirkland has become a golden asset in Costco's crown, giving shoppers a unique reason to shop there over other retailers both online and off.

Costco might not carry everything you want, but it's got what you need: its Kirkland Signature private brand.

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In Costco's annual report released in December, the retailer announced that sales of Costco's Kirkland Signature private-label brand grew to $39 billion in 2018, up from $35 billion in 2017. That's good for a sales growth rate of more than 10%, slightly higher than the sales growth rate for all Costco merchandise. It also means that Kirkland accounted for nearly a third of all Costco's sales.

Customers see the brand as a blend of quality and value, and it gives shoppers a unique reason to go to Costco that other retailers can't match online or off.

"Kirkland is a brand in its own right," Karen Short, a retail analyst at Barclays, told CNN . "It is one of the reasons people go to Costco. That's not necessarily something you can say about many private labels."

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But competing brands might see it as a threat. That could mean lower prices for customers, as other brands position themselves to better compete with Kirkland.

"When a traditional brand is losing shelf space or market share, what do they do? They create a better value," Costco CFO Richard Galanti told CNN in an interview.

If Costco undercuts a brand it sells with a Kirkland item, it often forces that brand to lower prices as well. It has happened with Poland Spring water, when after Costco lowered the price of the Kirkland 40-pack of water, Poland Spring reportedly also lowered prices.

Competitors have taken note of Costco's success with Kirkland.

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Walmart has turned up the heat on the Member's Mark private label at Sam's Club, while bulk online retailer Boxed has seen success with its Prince & Spring label .

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