Costco is endlessly mixing up its merchandise mix, offering everything from big-name retailers to the well-regarded Kirkland Signature brand.
Part of the joy of the brand is its treasure hunt model, where members never quite know what to expect. I might visit my local warehouse for toothbrushes, some coffee, and maybe socks, then I’m off with a canoe or a giant teddy bear.
Costco founder Jim Sinegal explained the magic behind the chain’s model.
“We’ve created a Treasure Hunt atmosphere. When customers come in, they might find at some point that we have a Coach bag and they come back and we don’t have the Coach bag, but maybe we have some Levi’s that we’re selling at a high price,” he told Masters Invest.
It’s all about making members feel the need not to miss out.
“We’re trying to create a sense of urgency, that if you see the product, you’d better buy it because chances are it won’t be there next time. We intentionally stay out of stock 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 boost sales.
The treasure hunt model fuels 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 warehouse expecting not only value but also surprise. This element of discovery—the opportunity to find an unexpected deal, an unusually high-quality brand, or a limited-time item—is a cornerstone of Costco’s Sale and Shared Mojojo business strategy.
The Warehouse Club, in Sinegal’s time, knew how to drive human behavior.
“It’s no accident. It’s a designed psychology, and when understood correctly, it becomes a powerful tool for suppliers looking to thrive 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.
More retail:
Costco has continued to add to this variety, surprising members by adding new items from big name brands.
“We added a number of new national brand partnerships across a wide range of non-grocery categories in the first quarter, including Gap and Ulta gift cards, Vera Bradley apparel and Upper Deck trading cards,” CFO Gary Millerchip said during the chain’s first-quarter earnings call.
Costco tries to keep customers guessing 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 noted that while Costco likes to delight members with name-brand surprise partners, it also uses its Kirkland Signature brand to add new items.
“Novelty has driven growth in this category as well, with trending items such as Dubai Chocolate performing very well. Kirkland Signature continues to grow at a faster rate 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 said.
Costco has been steadily adding Kirkland Signature items to its lineup while also mixing things up at its grocery store.
“During the first quarter, we launched approximately 45 new KS items, including daily clean dry face wipes, blueberry caramel croissants and various apparel items, in addition to our latest food court offering, the caramel brownie sundae,” Millerchip added.
These items work well.
“Kirkland Signature continues to grow at a faster rate than overall sales, with KS items typically offering a 15 to 20 percent value over the national brand alternative of equal or better quality,” Millerchip added.
Related: Popular furniture store brand closes, no bankruptcy
While Costco likes to keep members interested by adding new items, their core focus is on keeping prices low for members. That 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. 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 package; KS Whipped Cream 3-Pack from $10,949 and $3.99; from $14.49 to $12.99,” according to CFO.
Costco increased its membership fees in September 2024 by $5 for a Gold membership, now $65, and $10 for an Executive Member, now $130. The chain, however, didn’t put that extra income in its proverbial pocket.
“Costco appears to be reinvesting some of last year’s membership fee increase into higher prices 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.
More retail:
Morningstar Equity analyst Noah Rohr believes Costco has used pricing well to drive membership and sales.
“I think Costco’s pricing is fair, and in most cases its low-price value proposition is superior to its peers,” he told RetailDive.
Amazon Prime Members: Don’t Miss This Bonus Offer From Our Sponsor (Could Be Worth Hundreds)
Kirkland Signature was created to offer quality comparable to name brands at lower prices. Costco positions the private label as “as good as or better than leading national brands,” while often selling for about 20% lessreinforcing member value, according to the Tasting Table.
Many Kirkland products are actually made by well-known brand manufacturers. That means Costco can offer premium quality under the Kirkland label while avoiding the higher marketing costs that typical name-brand products incur, Mashed reported.
The Kirkland brand accounts for a large portion of Costco’s sales and profits. It has become a major revenue driver, generating tens of billions annually and increasing 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 high-volume orders and Costco gains quality products at lower costs, AInvest reported.
Costco is selectively adjusting its assortment to focus on Kirkland, where it adds value. The 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 perceptions, according to TheStreet.
The strategy helps Costco maintain competitive prices for branded items as well. By limiting SKU variety and buying in massive volumes, Costco negotiates lower prices for both Kirkland and national brands, effectively passing on the savings to members, the grocery commons.
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 availability of these products is critical to developing and maintaining member loyalty. These products generally have higher margins than national brand products and represent an increasing portion of our overall sales,” he said.
Related: Beloved Macy’s Christmas tradition ends abruptly after 80 years
This story was originally published by TheStreet on December 21, 2025, where it first appeared in the Retail section. Add TheStreet as a favorite source by clicking here.
