Costco + Value = BFF

Costco's store brand, Kirkland Signature seems to be a strong label, with a focus on quality and satisfaction in the vein of President's Choice. The big diff is that with Costco's modus operandi as a wholesaler, the products generally have a much lower price per unit cost, and hence a better proposition of value for money.


On our last trip to Costco, we noticed a flurry of cross-branding between Kirkland Signature and such products as Kettle Brand Chips, Jelly Belly jelly beans and Kirkland Signature brand fair-trade coffee, roasted by Starbucks where the package contains both the logos of KS and the major label brand. This is an interesting development to me, because it not only elevates the brand cache of KS, but also exposes products from the "name-brand" producers to a potentially new market for their wares.




As many of us know, name brand producers are often behind store brands, sometimes with the exact same product specifications (most notably ingredients & packaging format). The flip side of the coin can come when store brand products are made with inputs of different qualitative properties, such as, in the case of processed meats, the meat/filler balance, natural smoking vs. smoke extract, lean/fat allowances.



Recently, the Maple Leaf tainted meat scandal exposed the extent of production sharing between brands. Brands under Maple Leaf's corporate umbrella such as Schneider's, Shopsy's and Burns as well as products from store-brands such as No Name, Equality, and Compliments were affected during the scare. The pooling of resources to produce goods represents the best opportunity for capacity utilization and cost-control, but if not subject to stringent quality oversight, can run amok in a manner that compromises the safety of a broad strata of consumers



Costco Pro/Con Breakdown:



Pros:

• Kirkland Signature Brand is great for consumable household goods that a family is sure to plow through (think laundry detergent, garbage bags, batteries, paper towels)
  
  
• If at any point during your membership, you are not "satisfied", you can obtain a refund of your membership fee

• Free warranty extension (to 2 years) on certain electronic items (including televisions and computers) at no charge, in addition to a 90-day return policy on most consumer electronics
  
• For the social activist inside all of us, Costco employees sport a badge complete with not just their name, but their start year. From the badges I observed, it is not uncommon to see start-dates going back many years, with a few dating back to the early 1990's. This is increasingly uncommon within most modern retail operations, who seem to engineer (through low pay, lack of affordable benefits, lack of hours) rapid turnover of staff. Pay rates in Canada are much higher than their main competitor Sam's Club (owned by guess-who). Despite this great wage/benefit disparity, Costco manages to be the dominant force in wholesale retailing. Some people may find it re-assuring that Costco's business model does not take the view that success and decent remuneration must be mutually exclusive. I find a bit of satisfaction in the idea that I am supporting a company that allows it's workers and their families a fighting chance at a reasonable standard of living, all the while offering very competitive pricing. If employees earn a decent income they pay these things called taxes, that apparently contribute to sustaining the benefits we enjoy as Canadians. Kind of like a karma of consumerism, no? The trendy adage of "voting" with one's wallet comes to mind..
  

Here is simple example of the money saving power of Costco:

5% Cream (1L container)

Costco: $2.44
Sobey's: $3.89
If a couple of coffee fiends consume a 1L jug of cream in a bi-weekly period, they would save:

26 jugs x $1.45 = $37.70 per annum

Cons:

• Close proximity parking is definitely at a premium, especially on Saturdays (my family doesn't mind a little trot though)

• Membership fee of $55 applies to "Gold Star" annual pass, and Executive Membership comes with a price tag of $100 (both figures are pre-tax). Executive Membership offers a 2% annual rebate on almost all purchases (excluding postage stamps and a few other items) to a maximum rebate of $500. I obtained a discounted Executive Membership through my work, so the decision wasn't too hard. If you fail to reach the difference between membership levels ($43) Costco will cut you a cheque for the amount difference. Bear in mind that to reach the tantalising $500 rebate, a person would have to spend $25,000 within one year.
  


• Lack of organic food selection
  


• Brand breadth is limited (necessitated by volume purchasing approach)
  Risk of spoilage or expiry of perishables, if one succumbs to eyes-bigger-than-stomachitis
  Methods of payment are limited to cash, Costco Cash Card, debit or American Express
  
  

For historical disclosure purposes, The Wife and I were members of Costco years ago, when a previous employer also had a discounted membership available. We had switched to Sam's Club, because it is closer in proximity, and found the product selection to be substantially more narrow than Costco's. Sam's had the main advantages of abundant parking and a slightly less costly membership rate. In retrospect, I now understand the surplus of parking spots at Sam's Club.