Costco endlessly mixes up its merchandise mix, offering everything from major retailers to the well-regarded Kirkland Signature house brand.
Part of the joy of the brand is its treasure hunt model, where members never know exactly what to expect. I can visit my local store that needs toothbrushes, some coffee, and maybe dress socks, then leave with a canoe or a giant teddy bear.
Costco Founder Jim Sinegal explained the magic of the chain model.
“We’ve created a Treasure Hunt atmosphere. When customers come in, they can find at one point that we have a Coach handbag, and they come back, and we don’t have the Coach handbag, but maybe we have some Levi’s that we’re selling at a hot price,” he told Masters Invest.
All this is to make members feel the need not to lose.
“We try to create a sense of urgency, that if you see the product, you better buy it because chances are there won’t be the next time. We deliberately run out of merchandise to create that sense of urgency in our customers,” he added.
Now, Costco’s current CEO, Ron Vachris, has shared some new big-name retail partnerships that the warehouse club will use to drive sales.
The treasure hunt model reinforces the Costco brand.
“Costco’s ‘treasure hunt’ shopping experience has become one of the most iconic and influential pieces of modern retail psychology. Customers walk through the store expecting not only value but surprise. This element of discovery – the possibility of finding an unexpected deal, an unusual high-quality brand, or a limited-time item – is a cornerstone of Cosco’s business strategy, Sales and Shared Mojo.
The warehouse club, back in Sinegal’s time, knew how to manage human behavior.
“It’s not accidental. It’s an engineered psychology, and when understood correctly, it becomes a powerful tool for salespeople who want to succeed in the Costco ecosystem,” added Mojo Sales and Strategy.
The concept of treasure hunting is built on the behavioral principle that people are motivated by variability.
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Costco continued to add to that variability by surprising members by adding new items from big brands.
“We added a number of new national brand partnerships across a range of non-food categories in Q1, including Gap and Ulta gift cards, Vera Bradley apparel, and Upper Deck trading cards,” shared CFO Gary Millerchip during the chain’s first-quarter earnings call.
Costco tries to keep customers busy with its merchandise.Shutterstock” loading=”lazy” height=”540″ width=”960″ class=”yf-lglytj loader”/>
Costco tries to keep customers guessing with its merchandise.Shutterstock
Millerchip made it clear that while Costco likes to delight members with surprising big brand partners, it also strengthens its Kirkland Signature brand to add new items.
“Novelty has been driving growth in this category as well with trend items such as Dubai Chocolate performing very well. Kirkland Signature continues to grow at a faster pace than overall sales with KS items typically offering a 15% to 20% value compared to the national brand alternative of equal or better quality,” he shared.
Costco has steadily added Kirkland Signature items to its lineup, while also mixing things up in its food court.
“In Q1, we launched approximately 45 new KS items, including clean daily facial wipes, caramelized blueberry croissants and sundries in addition to our latest food court offering, the caramel brownie sundae,” added Millerchip.
Those items work well.
“Kirkland Signature continues to grow at a faster pace than overall sales, with KS items typically offering a 15 to 20% value compared to the national brand alternative of equal or better quality,” Millerchip added.
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While Costco likes to keep members interested by adding new items, its main focus is making sure prices are low for members. This also means lowering prices when possible.
“As always, our goal is to be the first to lower prices where we see opportunities to do so. A few examples of lower prices this quarter include KS Chicken Pot Pie from $4.29 to $3.99 per pound; KS Bacon from $18.99 to $16.99 per package; KS Whipped Cream 3-pack from $10.999; from $ 14.49 to $12.99,” according to the CFO.
Costco increased its membership fees in September 2024 by $5 for a Gold Membership, now $65 and by $10 for its Executive Membership, now $130. The chain, however, didn’t put that added revenue in its proverbial pocket.
“Costco appears to be reinvesting a portion of last year’s membership fee increase into stronger pricing for members while allowing the rest to flow to the bottom line, a win-win for both members and shareholders,” CFRA Research Analyst Arun Sundaram told Investing.com.
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Morningstar Equity Analyst Noah Rohr thinks Costco has used pricing well to drive membership and sales.
“I think Costco’s pricing is fair and, in many cases, its low-cost value proposition is superior to that of its peers,” he told RetailDive.
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Kirkland Signature was created to offer quality comparable to name brands at lower prices. Costco bills the private label as “as good or better than major national brands” while often selling for approx 20% lesswhich enhances value for members, according to the Tasting Table.
Many Kirkland products are actually made by well-known brand name manufacturers. This means Costco can deliver premium quality under the Kirkland label while avoiding higher marketing costs that carry typical brand products, Mashed reported.
The Kirkland brand represents a large share of Costco’s sales and profits. It has grown into a major revenue driver, generating tens of billions a year, and boosting Costco’s bargaining power with suppliers.
Costco leverages supplier relationships to benefit members and partners. Many national manufacturers partner with Costco to produce Kirkland products, creating a symbiotic relationship where suppliers benefit from large volume orders and Costco gets quality products at lower costs, AInvest reported.
Costco selectively adjusts its assortment to highlight Kirkland, where it adds value. Recent changes reflect more Kirkland products in categories such as health and beauty and mattresses, in part to offset external cost pressures and improve value perception, according to TheStreet.
The strategy helps Costco maintain competitive prices on name-brand items as well. By limiting SKU variety and buying in large volumes, Costco negotiates lower prices on both Kirkland and national brands, effectively passing the savings on to members, shared Grocery Goodies.
Costco reiterated the importance of its house brand in its annual report.
“We sell many products under our Kirkland Signature brand. Maintaining consistent product quality, competitive pricing, and the availability of these products is essential to developing and maintaining member loyalty. These products also generally carry higher margins than national brand products and represent a growing portion of our overall sales,” he shared.
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This story was originally published by TheStreet on December 21, 2025, where it first appeared in the Retail section. Add TheStreet as a Preferred Source by clicking here.
