B2 – Upper Intermediate
Costco’s Kirkland brand is a strategic success, built on aligning low prices, quality control, and member loyalty. By consolidating its private labels under a single brand, Costco has strengthened its ability to negotiate with suppliers while consistently delivering high-quality products at competitive prices.
Despite the risk of using a single brand, this approach has boosted customer loyalty and now accounts for over a third of Costco’s sales. With limited product options and strict quality oversight, Kirkland thrives in Costco’s membership-based model, setting it apart from other retailers with multiple store brands.
Watch the video to learn more about the innovative approaches that have allowed Costco to thrive in a competitive market and be prepared to answer the questions below.
Vocabulary Questions:
- .What does “profit margin” mean? “That opportunity came down to profit margins.“ Use this term in a sentence.
- What does “commodity input” mean? “Our buyers are very aware of the commodity inputs, the raw ingredients that go into something.” Use this term in a sentence.
- What does the idiom “hit someone right in the face” mean? “because everything that’s presented at Costco is presented pretty big, hitting you right in the face whenever you walk in there.” Give two (2) synonyms and use it in a sentence.
Discussion Questions:
- As a buyer, which type of product do you prefer: name brands or private label brands? What influences your decision?
- What factors might influence shoppers to choose a private label product over a name brand?
- How does placing a private label product beside a name brand item shape perceptions of quality and value? Provide examples of how this tactic might backfire or succeed.
- How does the perceived risk associated with different product categories (e.g., low-risk staples vs. high-risk electronics) influence trust in private labels? What could retailers do to bridge this trust gap?
- Does a membership model inherently create a sense of exclusivity or loyalty that enhances trust in private labels? How might this differ from non-membership retailers?
- Can a single bad experience with a private label product damage a retailer’s reputation more than a similar experience with a well-known brand? Why do you think that is? What strategies can retailers use to reduce this risk?