
How Kirkland Signature Powers Costco's Success - onetimemanytime
https://edition.cnn.com/2019/01/10/business/costco-kirkland-signature-brand/index.html
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bitxbit
What’s missing in this discussion is how much marketing and ad dollars figure
into pricing of goods especially among goods that are hard to differentiate.
Instead of thinking how much cheaper Kirkland (and other private labels) is
compared to branded goods, we should really think about the economic excess of
marketing in general.

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tgb
Here's my pet conspiracy theory: cigarette companies in the US colluded to get
themselves banned from marketing, thereby saving themselves tons of money.
Some research suggests marketing mostly just shifts spending from one brand to
another rather than from one product category to another, so the whole
industry is better off not marketing but without a government enforcing that,
any individual company could defect from the pact. And marketing was a way for
cigarette companies to subsidize things like public transportation and was
arguably their only positive contribution to society apart from taxes.

In reality, I don't think this adds up (why haven't they done the same in the
EU and other jurisdictions? didn't they also have to pay massive fines? etc.).

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Waterluvian
That's a fascinating theory that I'll be mulling about for a while.

My immediate thought is that smoking overall is falling and falling, so maybe
advertising does more than shift brand loyalty of existing customers.

Semi-related: I was pretty convinced that smoking was at maybe 5% in Canada
based on my observation that almost nobody where I've worked and gone to
school smoked. Turns out it's closer to 25%, which was shocking. I came to
realise that smoking must be very very concentrated among specific
demographics as to insulate me from it. Got me thinking about how my
perception of advertising for smoking may also be very very off.

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gotocake
_My immediate thought is that smoking overall is falling and falling, so maybe
advertising does more than shift brand loyalty of existing customers._

Smoking in the United States and other developed nations is declining, but
it’s rising worldwide. Tobacco companies simply shifted their focus to poorer,
less educated nations and they’re taking in the money.

[https://en.m.wikipedia.org/wiki/List_of_countries_by_cigaret...](https://en.m.wikipedia.org/wiki/List_of_countries_by_cigarette_consumption_per_capita)

 _While smoking rates have leveled off or declined in developed nations,
especially among men, in developing nations tobacco consumption continues to
rise._

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rfwhyte
I'd imagine a factor in the rising rates in developing nations is the due to
the fact that 40%+ of global tobacco sales come from state owned firms.
China's state owned China Tobacco company is the world's largest tobacco
company and earns profits in excess of $16 Billion annually. Very little
incentive to cut smoking rates when smoking is contributing billions to state
coffers.

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gotocake
That’s a very good point, but of course the government is going to have to pay
in some fashion for the health impacts of smoking. It’s sort of a weird
situation for a government to be in, making profit from tobacco and
shouldering the inevitable externalities. I don’t know the specifics of how
that breaks down though, or if it’s still a net profit center.

Of course it may not matter in the sense that cronyism could ensure the
burdens are placed on one group, and the benefits concentrated in another. I
don’t know enough about China though, to say more.

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craz8
A small correction: Costco is now headquartered in Issaquah, but they started
out in the city of Kirkland. They moved to Issaquah (a 20 minute drive) in
1994, about the time the Kirkland brand was created

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walrus01
I think the first Costco was located south of downtown Seattle, south of the
stadiums? Or is it the one that is actually in Kirkland relatively close to
the 405?

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peterkshultz
South of downtown was the first one, yes. See "The History of Costco" at:
[https://www.costco.com/about.html](https://www.costco.com/about.html)

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syntaxing
I love Kirkland branded stuff. The best thing you have to try is their
Kirkland branded hard liquor particularly the vodka. Affordable and smooth!
Their wine is good to me, but most wine connoisseur disagree.

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Xylakant
> Their wine is good to me, but most wine connoisseur disagree.

Unless you have a connoisseur as guest and want to impress them, “good to you”
is the more important qualifier. There’s probably a lower threshold to wine
quality that you shouldn’t go under (additives that are unhealthy and such),
but above that, there’s little point in buying wine that connoisseurs
recommend and you dislike.

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syntaxing
Totally agree. Kirkland wine is good because it actually tastes like real wine
but is the same price as grape flavored alcohol water.

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bdcravens
I believe a number of the Kirkland products are just rebrands. For example,
their dog food, which is highly rated, is actually manufactured by Diamond.

[https://www.certapet.com/kirkland-dog-
food/](https://www.certapet.com/kirkland-dog-food/)

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extrapickles
Most store brands are made by contract manufacturers to the stores
specifactions. It’s rare for a store to directly manufacture their own goods
in the food industry. This is because a store only needs a given type of
facility for a few days a month, making it uneconomical to operate it
themselves.

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joezydeco
That's starting to change a little.

[https://www.eater.com/2018/12/11/18136019/costco-
rotisserie-...](https://www.eater.com/2018/12/11/18136019/costco-rotisserie-
chicken-farming-agriculture-nebraska)

"At the center of the move is the company’s $4.99 rotisserie chicken. In 2014,
Costco reported selling 78 million of these processed, four-pound birds a
year. In order to guarantee a steady supply and maintain the price, Costco
fixed its eye on Nebraska as the best place to start raising and processing
its own supply of chickens, and “break free of the monopoly” held by companies
such as Tyson and Pilgrim’s Pride, much like it did for sausage and hotdogs
with its Kirkland plant in Tracy, California."

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QuantumGood
Wonder how the extreme flooding in NE is affecting that.

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_eht
I see a lot of up and coming angst from politicians about how Amazon the
platform, and Amazon the product(s) should be broken up due to unfair
advantage over other retailers trying to sell on the AMZN platform.

Is AMZN’s framework similar and does it not mimic a lot of massive sales
platforms from Costco to Walmart, and even to smaller grocery stores who share
their shelves (the platform) with products often times mixed with self branded
products?

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AjithAntony
The key difference is that Amazon is selling its infinitely deep platform to
third parties. It is those third parties that bear all the risk of developing
and marketing a product. Costco and Wal-Mart buyers and merchandisers still
need to take the risk of choosing what limited inventory to stock on the shelf
and commit resources to making it happen. Amazon also invites all competitors
in a product segment to compete with each other. Using the information
gathered from the sales, reviews, page views, demographics, and who knows what
else, they can create the perfect Amazon basics version of that product pretty
much on the fly with pretty low commitment.

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teej
Everything you’ve claimed about Amazon applies to traditional retailers.

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benj111
He's referring to Amazon marketplace. Providing a platform for third parties
isn't done by traditional retailers.

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kinkrtyavimoodh
Why not? When Costco offers its shelf space to non-Costco brands, how is it
any different from what Amazon does?

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benj111
Because Costco are taking a risk. You can only have X different widgets on a
shelf, its a limited resource so you can't just let every brand in to sell
their wares and take a cut. This in turn means Costco has to take on other
risks. They're liable for fakes, they're liable if something doesn't sell (I
assume Costco probably does sale or return for new suppliers? But there are
limits to this). They're doing the fulfilled by Amazon role as well.

Its the difference between a Farmers Market and wholefoods. You as a consumer
probably have nothing to do with the market organisers, and they don't have
any particular responsibility toward you.

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fmajid
What's confusing is that the Kirkland Signature brand is also put on items
that are not own-brand, e.g. the big Jelly Bely canisters have dual "Kirkland
Signature" and "Jelly Belly" branding.

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andyjsong
My guess is that Jelly Belly has very strong brand recognition, so it made
sense to keep them on the label. A collab if you will:

Kirkland Signature x Jelly Belly

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dontbenebby
GNU/Kirkland

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sergiotapia
Without Kirkland, we would probably not be Costco members. From boxers, to
belts, to shorts, to soap, to makeup removal towelettes, to white tshirts, to
coffee - my family buys the stuff because we know it's good quality and not
overcharging us.

My parents love to make fun because one day without realizing I was wearing
shoes, socks, shorts, t-shirt and belt; all kirkland.

Never seen a brand like it and they don't do marketing whatsoever. It's pretty
crazy!

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dawhizkid
Costco is great if you know what to get...meaning there's a lot of amazing
deals next to things that are priced no better than anywhere else from my
experience...

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dba7dba
Someone told me the product with best margin that Costco sells is ... Kirkland
toilet paper.

They drove down the cost to absolute minimum simply by opening their own
factory.

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benj111
"best margins" suggests highest profit as percentages of retail price right?

That sounds wrong. Toilet paper isn't a traditionally high margin thing, and I
doubt they'd be able to wring out much more margin by buying the factory, or
else everyone would do it. High margin products traditionally are either the
luxury products, low volume products, or convenient/convenience products
(chocolates by the till, sandwiches to go).

Now its possible that toilet roll is their most profitable product in absolute
terms. Everyone needs toilet roll so they probably sell a lot.

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rebuilder
Firefox on Android asked permission to record audio and video when I visited
that article. Seems pretty suspect.

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greggyb
I've noticed the same and posted an Ask HN about it:
[https://news.ycombinator.com/item?id=19476673](https://news.ycombinator.com/item?id=19476673)

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ratling
You could text replace Kirkland Signature with Amazon Basics in this article
and it's the same story.

Housewares are commodities. In most cases brands mean a whole lot of nothing
until you get up into the bespoke option price point (and lots of things just
don't have that at all).

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mc32
Supermarkets have had No Frills brands forever but tended to be inferior
(bottom of barrel beer, cling wrap that doesn’t cling, salt that clumps).
Kirkland departs from that.

What is a little surprising is thd success despite the uninspiring design
(unlike While Foods which prettifies it’s own line with modern color schemes,
design and logos).

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maxxxxx
“despite the uninspiring design”

It just shows that all the focus on design is not needed if you produce
quality products over a long time. Once you have a reputation there is no need
for constant “modern” redesign. Just keep the quality up.

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simonh
It’s nowhere near as simple as that. Store brand products have one special,
massive advantage over non-store products. They don’t need to fight for shelf
space - they are guaranteed it. As a result they don’t need to market heavily
because they will automatically get the exposure they need. Try doing that
with a non-store brand. Chances are you will go bust before you get the
opportunity to build a reutation for quality.

The other issue here is that an overtly ‘basic’ brand name and trade dress is
a form of marketing. Some people will go out of their way to seek out such
products, for them its useful product differentiation and in fact it works
exactly the same way as brand differentiation. It’s not actually any cheaper
either, it isn’t any less expensive to print a generic label as a fancy one.
The guveaway is packaging quality, it’s usualy comparable on store brand goods
because in reality people aren’t looking to trade off quality for price.
They’re trying to get quality products cheaper. It’s all just signaling.

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0db532a0
This is off-topic.

