Costco has become an unlikely $7 billion fast-fashion destination - and other retailers should take note

Mohammad Khursheed/REUTERS

Costco has quietly become a clothing destination.

• Costco has established itself as an unlikely leader in apparel and footwear sales, bringing in $7 billion in annual sales at a rate that has been growing by 9% for the last four years, according to The Washington Post.
• Fast-fashion brands have found a sweet spot in offloading excess inventory at Costco stores, where an audience of 85 million members is increasingly loading apparel items into their carts.
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Amid the towers of bulk toilet paper and cereal, Costco members are increasingly flocking to the wholesale retailer for a surprising reason: fashion.

While Costco might not seem like the obvious destination for stylish clothing, the warehouse store is raking in more than $7 billion in apparel and footwear sales, with revenues in that category growing 9% a year for the past four years, according to The Washington Post. Though most of Costco's 800 stores are large warehouses across the US lacking offerings like fitting rooms, shoppers are increasingly making room in their carts for heavily discounted North Face jackets, Jessica Simpson jeans, and Calvin Klein blouses.

A Costco representative declined Business Insider's request for comment on the $7 billion sales figure.

"Costco has quietly become an apparel destination," Simeon Siegel, a retail analyst for Instinet, told The Post. "It is clearly resonating with shoppers and winning over brands at the expense of department stores."

Perhaps most impressively, Costco's apparel sales - which also include products from its namesake Kirkland collection - are outpacing some traditional retailers like Old Navy, Neiman Marcus, and Ralph Lauren. Costco's success in the fashion sector is partly thanks to its captive audience of 85 million members who pay an annual fee of $60 and up for access to discounted bulk goods.

Read more: From rings to cakes, Costco has what you need for a budget wedding

Add the fact that fashion companies are seeking out viable ways to unload excess inventory - and a willingness to do so even at a seemingly unglamorous venue like Costco, thanks to its largely affluent client base - and you've got a recipe for success.

However, though Costco may have established itself as an unlikely fashion source, its success may be a flash in the pan unless the retailer finds a ways to court millennials. As Elizabeth Segran, a retail analyst and staff writer for Fast Company wrote, Costco's client base skews older, and though its Gen X and Baby Boomer members are loading up on fast fashion, many millennials are seeking out more sustainable alternatives.