Costco endlessly mixes its merchandise mix, offering everything from big-box retailers to its venerable Kirkland Signature House brand.
Part of the joy of the brand is its treasure hunt model, where members never know what to expect. I’d head to my local warehouse for a toothbrush, some coffee, and maybe some dress socks, then grab a canoe or a giant teddy bear.
Costco founder Jim Sinegal explains the magic of the chain’s model.
“We’ve created a treasure hunt environment. When customers come in, they might find a Coach handbag with us once, and they come back, and we don’t have a Coach handbag, but maybe we have some Levi’s that we’re selling at a hot price,” he told Masters Invest.
It’s all about making members feel the need not to miss out.
“We try to create a sense of urgency, that if you see the product, you’ll buy it because next time it might not happen. We’ve intentionally finished merchandise to create that sense of urgency in our customers,” he added.
Now, current Costco CEO Ron Vachris has shared some new big-name retail partnerships that the warehouse club will use to drive sales.
The Treasure Hunt model powers 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 into a warehouse expecting not just value but surprise. This element of discovery—an unexpected deal, the possibility of finding an unusually high quality item, or a limited-time merchandise strategy—is a common Kono brand. Sales and Strategy.”
The Warehouse Club, back in the days of Senegal, knew how to manipulate human behavior.
“It’s not accidental. It’s engineered psychology, and when understood correctly, it becomes a powerful tool for sellers who want to thrive within Costco’s ecosystem,” added Mojo Sales & Strategy.
The treasure hunt concept is built on the behavioral theory that people are motivated by variability.
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Costco continues to add to that variability by surprising members with new items from big brands.
“We added several new national brand partnerships in Q1 across a range of non-food categories, including Gap and Alta gift cards, Vera Bradley apparel, and Upper Deck trading cards,” shared CFO Gary Millerchip on the chain’s first-quarter earnings call.
Costco tries to keep customers guessing with their merchandise.Shutterstock” loading=”lazy” height=”540″ width=”960″ class=”yf-lglytj loader”/>
Costco tries to keep customers guessing with its merchandise.Shutterstock
Millerchip explained that while Costco likes to delight members with surprising big-name brand partners, it also leverages its Kirkland Signature brand to add new items.
“On-trend items such as Dubai Chocolates are performing very well and innovation is driving growth in this category. Kirkland Signature KS items are growing faster overall sales compared to national brand options of equal or better quality that typically offer a 15% to 20% premium,” he said.
Costco has steadily added Kirkland signature items to its lineup, while mixing things up in its food court.
“In Q1, we launched approximately 45 new KS items, including dry facial daily clean towels, caramelized blueberry croissants and a variety of clothing in addition to our latest food court offering, the Caramel Brownie Sundae,” added Millerchip.
Those items perform well.
“Kirkland Signature continues to grow at a faster pace than overall sales, with KS items typically offering a 15 to 20% premium over national brand alternatives of similar or better quality,” added Millerchip.
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While Costco likes to keep members interested by adding new items, its main focus is on making sure prices are low for members. This also means reducing prices as much as possible.
“As always, our goal is to be the first to reduce prices where we see opportunities to do so. Some 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 packet; KS Whipped Cream 3-pack from $3.49 and KS Whipped Cream from $109 per 3-pound pack. from $14.49 to $12.99,” according to the CFO.
Costco increased its membership fee by $5 in September 2024 for a Gold membership, now $65, and $10 for its Executive membership, now $130. The chain, however, isn’t keeping that added revenue in its proverbial pockets.
“Costco appears to be reinvesting part of last year’s membership fee increase into sharper pricing for members, while allowing the rest to flow to the bottom line, a 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 price well to drive membership and sales.
“I think Costco’s pricing is fair and, in most instances, its low-cost value proposition is superior to its peers,” he told RetailDive.
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Kirkland Signature was created to offer quality comparable to name brands at lower prices. Costco rates private labels as “as good or better than leading national brands” while often selling for approx. 20% lessReinforcing value for members according to taste schedule.
Many Kirkland products are actually made by well-known name-brand manufacturers. That means Costco can offer premium quality under the Kirkland label and avoid the high marketing costs that generic branded products carry, Maced reported.
The Kirkland brand accounts for the bulk of Costco’s sales and profits. It has grown into a major revenue driver, generating tens of billions annually, and increasing Costco’s negotiating power with suppliers.
Costco leverages supplier relationships to benefit members and partners. Several national manufacturers partner with Costco to produce Kirkland products, creating a symbiotic relationship where suppliers benefit from large-volume orders and Costco receives quality products at lower costs, AInvest reported.
Costco selectively adjusts its assortment to emphasize Kirkland, where it adds value. Recent changes reflect Kirkland products in categories such as health and beauty and mattresses, partly to offset external cost pressures and increase value perception, according to TheStreet.
The strategy helps Costco maintain competitive prices even on name-brand items. By limiting SKU variety and buying in bulk, Costco negotiates lower prices on Kirkland and national brands, effectively providing savings to members on shared groceries.
Costco reiterated the importance of its house brand in its annual report.
“We sell many products under our Kirkland Signature brand. Consistent product quality, competitive pricing, and availability of these products are essential to developing and maintaining member loyalty. These products typically carry higher margins than national brand products and represent a growing portion of our overall sales,” it 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.
