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

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Obama in costcoAP/Charles Dharapak

  • 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.

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."

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.

Read more: Boxed, 'the Costco for millennials,' says its private label is blowing up, and it reveals a new front in the war for online shoppers

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

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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