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You'd lose Costco's Kirkland brand, which is one of those rare instances of the store brand often being better than the name-brand.
by AdmiralAsshat 6y ago
You'd lose Costco's Kirkland brand, which is one of those rare instances of the store brand often being better than the name-brand.
- codegladiator 6y agoWhy can't they still sell it at stores which they don't owe?
- Miraste 6y agoBetter to cancel the line than supply competitors with better cheaper products than your own store.
- codegladiator 6y agoSorry I don't get the point. Costco's competitors selling Costo's cheaper product would still harm costco ? Does costco get some extra benefit if the consumer buys Kirkland from costco ?
- Miraste 6y ago> Does costco get some extra benefit if the consumer buys Kirkland from costco ? Yes. Costco positions their store brand as a major part of their appeal. This attracts more consumers to their stores, which A. Increases membership, for which there's an annual fee, and B. Increases traffic, increasing sales of high margin items as well as the low margin store brand.
- B_ryJenkins 6y agoIf Costco sells their products at other stores they are effectively shooting themselves in the foot: It is providing the lower price of their products to be accesed without paying for a membership; which is how Costco makes money.
- lotsofpulp 6y agoCostco's value proposition is that they make (on average) no net income from sales of their products, and that you will find no other competitor who can sell the same quality products at a cheaper price (because costco's already selling them as cheap as possible). In exchange, they ask you to pay a membership fee, which is their net income. If they were to give away their reputation to other sellers by letting them sell their QC'd products, they would be lowering the value of their memberships.
- indymike 6y agoThat's not always the case. Sometimes the white label results in a small decrease to the name brand and captures sales to a different market.
- AdmiralAsshat 6y agoBear in mind, I have no idea how wholesalers work in this day and age. But once upon a time, a wholesaler like Costco sold stuff at cost (e.g. they charge what they paid the supplier for the product), and their revenue derived from the annual membership fees. So it's not in Costco's interest to start selling Kirkland Brand Extra Virgin Olive Oil at Safeway, because it wasn't a profit center to begin with. The whole point of selling their own branded product was: a) To reduce costs by controlling the entire means-of-production b) To ensure quality control on the product and build faith in the brand, which in turn c) Pulls people into the store, forcing them to buy a Costco membership if they want the product.
- gamblor956 6y agoWith regards to (a), Costco doesn't do that. Their entire Kirkland line is white-label products, excepting their pizzas which use dough made by regionally locally bakeries. They do have employees oversee (b), but they don't oversee the actual production; they conduct random inspections of shipped products. For example, Kirkland coconut water is simply white-label Vita Coco, and the made by label indicates it is packaged for them by the same company that produces Vita Coco.
- e_y_ 6y agoI'm not sure about the old days, but I believe Costco has stated they cap their markup at 15% -- which along with membership fees pays for employee salary, operations, and profit. I'm guessing that's overall and some products are more profitable while others (like their rotisserie chicken) are subsidized.
- triceratops 6y agoOne of the reasons I keep a Costco membership is for access to Kirkland products. And I think they know that a lot of their customers feel this way.
- mtgx 6y ago> one of those rare instances You said it, not me. We can't have policy revolving around a single company. The net positive would be greater in the market if platforms wouldn't be able to double-tip.
- gamblor956 6y agoMost of the Kirkland brand products are white-label products made for them by companies that sell competing name-brand products. Costco has employees that oversee the QC of these white-label products.
- true_religion 6y agoQuality control is basically the differentiator in modern manufacturing. Intels high price chips, and low price chips are often the same chip except the low priced one failed quality control and had some of its circuits turned off.
- LordDragonfang 6y agoThis common process is called binning, in case anyone wants to read more on it. Wikipedia article, as a primer: https://en.wikipedia.org/wiki/Product_binning https://en.wikipedia.org/wiki/Product_binning
- e_y_ 6y agoChip binning is something of a special case. Most of the time, when part of a product fails, you have a useless/unsellable product that needs to be reworked or scrapped.