The Unexpected Reason Kirkland Signature Products Are Surprisingly Cheap

Shopping at Costco is a one of a kind experience. If you've ever been to one of their locations, or are currently a member, then you're well aware of the allure that the store presents. You can buy pretty much anything at Costco, which makes it an efficient one stop shop for all your grocery, home, and personal product needs. For example, outside of bulk packaged food and drink products, you can also purchase furniture, electronics, tires, and even gasoline. In fact, it wouldn't be too farfetched to assume that people pay a monthly membership fee solely to access the gas station since Costco gas prices are some of the cheapest out there and with good reason. Speaking of affordability, Costco's in-house brand, Kirkland Signature, also offers customers cheap prices on quality products.

In fact, according to Linx Research the brand accounted for 31% of Costco's total revenues in 2021, or a whopping $59 billion in sales. If you're asking yourself how Kirkland Signature prices can remain so cheap, the answer can largely be boiled down to five factors. These include private labeling, membership fees, efficient supply chain management, collaborations with established brands, and the fact that they spend no money on advertising.

Low prices are one of the core values of Costco. After all, where else can you buy a hot dog for $1.50 in 2025? However, there are Costco buying mistakes that can leave you spending more money than you expected once you make it to the register. That said, one of the best ways to save money at Costco is through purchasing Kirkland Signature products because these products are generally valued at as much as 20% less than other name brand products. The major reason for this is because Kirkland Signature products are private label.

Costco controls both the production and distribution of these products, cutting out the middleman entirely. Unlike name brand products that have to spend more to get their products to a store, Costco is able to streamline its supply chain process. This allows them to save a ton of money while offering their products at much lower rates than name brand alternatives. Plus, around three-quarters of Costco's annual profits comes from its membership fees, which helps the company offset its lower prices. For example, in 2022 they netted $4.6 billion in revenue from membership fees alone. Costco also does not pay for advertising, which helps them save money in terms of operational costs.

Despite recent changes coming to Costco in 2025, generally speaking when you visit a warehouse you immediately notice how massive the place is. However, what may be surprising to hear is that Costco actually ends up with a much more limited inventory compared to other large supermarkets like BJ's due to how fast they turnover products. Specifically speaking, Costco stores only keep around 3,800 different items at all times compared to competitors that keep over 7,000. The major reason why Costco interiors appear larger is that almost everything is sold in bulk. However, it isn't just consumers that buy products at Costco in bulk, but also Costco themselves, which is another reason they are able to keep Kirkland Signature products at low prices.

Costco's bulk buying goes hand in hand with its brand name collaborations. Well established manufacturers of various products can, and do, sign substantial deals with Costco that allow Costco to buy these products in bulk at a discount before selling the product under the Kirkland Signature brand name. Now, while one could argue that a manufacturer could potentially earn more money through traditional sales under their own name, working with Costco can allow companies to make significant profits in a smaller time frame. This results in a win-win for everyone involved, as consumers still get to enjoy name brand products, but at a reduced price point.