How Costco Chooses Its Kirkland Products

When you need an enormous amount of toilet paper, an always-cheap rotisserie chicken, or some snacks for an office party, you know where to go: Costco. As you fill your cart with bulk items, you're likely adding quite a few Kirkland Signature products. None of those items is on the shelf by accident. In fact, the journey from a simple carton of cage-free eggs to an official Kirkland-branded staple is an incredibly rigorous process, considering every single potential product requires final approval from CEO Ron Vachris himself. "I'm the last sign off on every Kirkland item," he stated in an interview with Wall Street Journal (via YouTube).

But that's the last step in the journey. The first stages involve the buyers — savvy folks who recognize that there is a market for a specific item, typically at a specific price point. They seek out a certain type of manufacturer, one that sees the value in high-volume sales at a lower profit margin. In some cases, too, the buyers work with a manufacturer not to purchase an existing product, but to have one specifically created for the Kirkland Signature brand.

The item is then sent to Washington — to Costco's home base — where employees get to taste-test it (if it's a food product). The evaluation stage by team members can last a while, but the potential product works its way up the management chain until it reaches Vachris. If he approves, the item gets added to the Kirkland Signature brand family, where it eventually gets shopped by Costco members.

It's clear that Costco runs a tight ship, and in fact, the buyers negotiating with manufacturers for both the lowest price and the highest quality plays into how the warehouse chain can keep its prices so low. But Costco also intentionally limits the number of items that sit on its shelves to about 4,000 SKUs (compared to, say, Walmart, which can have more than 140,000 in any given store). So products — new or existing — must earn their space in Costco. Corporate is always keeping an eye on sales, and if a new Kirkland Signature product in particular sells well and appears to be popular among customers, it can earn a permanent spot on the roster.

If a Kirkland item proves more popular during a certain time of year, Costco may add it to a seasonal rotation of goods, like its chicken pot pie only being available during the fall and winter. If, however, a Kirkland product doesn't have good sales numbers and doesn't prove very popular with customers, well, it can vanish from shelves forever, never to be seen or heard from again. Of course, there are plenty of underrated Costco foods that deserve a permanent spot on the floor, but the retail giant simply doesn't play favorites. It will ruthlessly prune dead branches, leaving space for new growth to appear.