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Costco’s private-label reigns while Amazon’s owned brands fumble.

WHAT HAPPENED: Costco’s private-label brand Kirkland is responsible for almost one-third of the retailer’s sales.

Why it matters

  • In Costco’s latest annual report, the company stated that Kirkland sales rose $4 billion between 2017 and 2018—a higher growth rate than sales across Costco’s overall brand assortment. Kirkland offers products in a wide variety of verticals, from groceries and gas to apparel and household goods. The financial firm UBS estimates Kirkland’s total value at $75 billion, and gas sales aside, the private label comprises 25% of Costco’s total sales. Such strong performance of an owned brand means that Costco can capture higher margins, while also pressuring its third-party brands to lower prices—a win for the company and a win for shoppers.

  • Kirkland also provides a foil to Amazon and its growing number of private-label brands. First, Kirkland’s branding is much stronger—there are dozens of verticals under the single Kirkland umbrella, while the majority of Amazon’s approximately 148 private labels are not named after the brand itself, making them difficult to differentiate from third-party brands, aside from Amazon’s efforts to advertise them. There’s also the question of quality. About 68% of Amazon’s owned brands are apparel-focused—an area where Amazon continues to struggle, even as it gains market share over the clothing category overall. Similarly, a study by Marketplace Pulse found that the success of AmazonBasics batteries, a private-label product that quickly usurped Duracell and Energizer sales on the platform, was an outlier to most of its owned brands, which fail to make an impact. While Amazon inherited the successful Whole Foods 365 private label and its Echo brand continues to see growth, it has yet to crack the code on many of the categories Kirkland has.

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