Velvet |
07-12-2025 08:24 PM |
Wanna understand the “Costco cult”?
‘Costco COST 0.02%increase; green up pointing triangle was recently sued by Lululemon LULU -0.84%decrease; red down pointing triangle for allegedly selling cheap knockoffs of the athleisure brand’s premium clothing. One of those products is a pair of comfortable, fashionable, wildly popular Lululemon men’s pants that came out a decade ago and cost $128.
A few years ago, Costco began selling a version of those pants that looked and felt awfully similar—for $20.
And you don’t exactly need a law degree to read this legal document and see why so many people are so completely obsessed with Costco.
Those pants were part of the Kirkland Signature private label, which is based on a simple but powerful idea: sell products of a high quality at a low price. With that philosophy, Kirkland has become essential to Costco’s success. No less a Costco authority than co-founder Jim Sinegal describes the creation of Kirkland three decades ago as one of the crucial developments in the history of the company.
The store brand now accounts for roughly a third of Costco’s revenue—and it’s growing faster than the company as a whole. Costco’s total sales have almost doubled since 2017. Kirkland’s have almost tripled.
At this point, it’s bigger than many of the world’s biggest companies. . Kirkland alone brought in $86 billion last year—more than all of Procter & Gamble. In fact, this brand known for no-frills affordability generated roughly the same annual revenue as luxury giant LVMH.
It doesn’t just drive sales. It also breeds loyalty. It gives people a reason to become members—and members a reason to keep coming back. If the cult of Costco had a Kool-Aid, it would definitely be Kirkland Signature.
Perhaps the most important thing that Kirkland does is bring down the price of other brands.
To understand why, it helps to have a basic understanding of Costco economics. The company stocks fewer items than traditional retailers and makes up for smaller margins with absurdly large volumes. It sells branded products at no more than 14% above cost, even if that means leaving extra profit on the table. For Kirkland products only, Costco makes an exception and permits a markup of 15%. ‘ WSJ July11/25
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