Recently, I leafed through the March/April issue of Costco Connection magazine (Canadian edition). In case you haven’t read it, the issue celebrates the 15th anniversary of the retailer’s Kirkland Signature brand.
According to the publication, private label makes up approximately 10 percent of Costco’s current assortment. And own-brand products - from jeans to freshly prepared meals - can be found in many of Costco’s categories.
Costco first came to Canada
back in 1995. However, it wasn’t until I moved to San Diego
in 1999 that I had my first real taste of warehouse shopping at the original Price Club (which later merged with Costco) on Morena Boulevard
. I remember being amazed by the club’s merchandising and layout.
I also remember how impressed I was with Costco’s unconditional guarantee on products and membership. Hate the product? Bring it back. Regret becoming a member? Get a refund. Back then, you didn’t see that kind of after-sales service in the retail world.
Of course, times have changed, and now there are limits and restrictions on certain types of products and transactions. But Costco still is the leader when it comes to after-sales service. That commitment to customer service puts the retailer in a very unique position - it can offer a private label that has the distinction of being associated with the retailer’s “No Hassle” return policy.
While most chains stand behind their store brands with their own guarantees, Costco has built its brand on the fact that if you don’t like a product, you can return it. Many consumers look at purchasing a Kirkland Signature product this way: I’m buying this item at Costco, so if a problem arises, I can return the product hassle-free.
Such guarantees help bring about the consumer loyalty that is making store brands so popular and causing national brands to struggle. In Canada
, Walmart and Loblaws are the two big private label players, and when walking down either retailer’s aisles, you can see the slow phase-out of national brands in certain categories. For example, a quick SKU count at my local Loblaws indicates that the frozen food cabinet is stocked mostly with the retailer’s President’s Choice products.
Do name brands have a future in retail? Certainly. However, it’s important to note the recent growth of private label. It has a large place in many categories, and at some chains, the only products available are those under store brands.
For example, if you pick up rubbing alcohol at Shoppers Drug Mart, you’re going to buy a Life Brand product. And if you want frozen lasagna from Loblaws, you’re going to pick up a President’s Choice item. Clearly, national brands need to come up with a new strategy to compete against the onslaught of private label products coming to market.
Until that strategy is developed, I’ll be glad to visit Costco for my big jar of Kirkland Signature chocolate-covered raisins!
Doron Levy is president of Captus Business Consulting, a Toronto-based retail-consulting firm. E-mail him at email@example.com