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Amazon’s surprising role in selling Costco’s house brand

October 11, 2016 04:49 PM
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I was wrong and I should have known better. I have always associated the Kirkland Signature brand with Costco. If you shop at Costco it is likely that you know that Kirkland is a private-label brand that Costco pushes from vitamins and supplements to T-shirts and jeans.  Kirkland branded items are ubiquitous at Costco. That is why I was so surprised to learn that Costco.com is NOT the #1 seller of Kirkland items online.

I live in the world of measuring how and what people buy online, and am always telling our customers that what you see happening in brick and mortar is NOT what you are going to see online.

If I had listened to my own advice, I wouldn’t have been surprised to learn that Amazon Marketplace is by far the #1 seller of Kirkland items online. It is also the website with the highest conversion rate (14.3%), which means that customers who view Kirkland products on Amazon are most likely to make a purchase. By looking at share of dollars by website for year-to-date online Kirkland sales, you can tell that third-party sellers on Amazon Marketplace are having a field day selling Kirkland items.

[There is nothing new about other retailers selling Costco products, a Costco spokesman tells Internet Retailer. He says for 40 years Costco has sold products on a wholesale basis that other retailers resell, or that other businesses—such as restaurants or medical offices—use themselves.]

Amazon might be the only retailer ahead of Costco online, but other sites are making progress. Even though Jet has only been around for one year, they have the third-highest share of Kirkland sales online. Wal-Mart, which is acquiring Jet, also owns one of Costco’s biggest competitors, Sam’s Club. Watching how Kirkland’s relationship develops with a Wal-Mart brand online is something worth keeping an eye on.

While Amazon Marketplace has the lion’s share of Kirkland sales, it is worth noting that the average price paid for Kirkland products on Costco.com is significantly higher than the average price paid in the Marketplace:

Looking beyond the sites and in to the categories and products, we begin to see more differences between Costco.com, Amazon Marketplace and Jet.com.

Of these retailers, there is only one product that appears in multiple lists for the top Kirkland products by units sold. This variety emphasizes how important product assortment can be when trying to gain market share and boost sales. The 13-Gallon Kitchen Trash Bags appear in both Amazon Marketplace and Jet.com’s top Kirkland items, but it’s worth noting that their prices vary greatly.

In the Amazon Marketplace, customers pay an average of $22.72, while Jet.com’s ASP for the same product is just $14.25. Even though these trash bags cost an average of $19.01 on Costco.com, the product didn’t make it into the top ten Kirkland items that Costco sells online. Sellers in Amazon Marketplace are evidently doing a great job at promoting this product while getting away with selling it for 20-60% more than the average sale price on other websites.

Conclusion

Costco can achieve better results online by:

  1. Monitoring third-party selling activity
  2. Improving conversion rates
  3. Optimizing product assortment and pricing
  4. Keeping their cashews fancy

The fact that Amazon is the number one online seller of a Costco-owned brand is a clear example of how online spending behavior is often different from in-store. As e-commerce becomes a key driver of sales, it’s important for brands and retailers alike to understand and measure the difference in behaviors across channels to stay ahead of the competition.

Methodology

1010data utilizes a number of sources of consumer spending data representing millions of consumers to provide an accurate assessment of online and offline retail sales, market share, and more. Our data enables clients to track consumer behavior using high-quality, granular datasets that are often difficult to source, cleanse, and consolidate.

 

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