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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Kirkland for Christmas: Holiday shoppers are ditching logos for store brands

Some private label-brands including Costco’s Kirkland have gotten so popular they’re driving shopper visits and becoming major revenue generators.   (Stephanie Keith/Bloomberg)
By Leslie Patton and Jaewon Kang Washington Post

Jewelry reviewers on TikTok are recommending Costco’s $140 gold heart earrings for Christmas presents. Consumer Reports is championing an Amazon Basics blender among its best gifts under $40. And holiday shoppers are ditching Zara for Target for the quality, not just the price tag.

“They do a very good job of being princess outfits without have the actual princess on it, which I think is a very good look,” said Ashley Glazer, a 33-year-old retail buyer in New York, who got her daughter Target dresses as a holiday gift for the first time this year.

Store brands have had a glow up in recent years. So much so, that at a time when consumers typically splurge on holiday items, they’re opting for products that wouldn’t have been considered Christmas worthy before.

Retailers initially started their own lines – a category known as “private label” – to undercut name-brand offerings on price. At first they were of lesser quality. Now, that’s not the case.

Consumers across incomes and generations increasingly say private label brands are just as good as national rivals, according to data from market researcher NIQ. A McKinsey survey from last fall found that the No. 1 reason customers buy private label is for “quality equal to that of brand names for less cost,” ranking ahead of saving money.

Some private label brands like Amazon Basics and Costco Wholesale Corp.’s Kirkland have gotten so popular they’re driving shopper visits and becoming major revenue generators. And this year, they’re helping lure shoppers during a make-or-break holiday season when many say they’re feeling more stretched than ever.

Store brands “have done a good job of prestige-ifying,” said Bryan Leach, chief executive officer of Ibotta Inc., which partners with retailers to give shoppers cash back on purchases. “There’s like a cult following.”

The shift is so pronounced it’s forced consumer packaged goods makers of slightly higher-end products, including Procter & Gamble Co., Kraft Heinz Co. and Danone SA, to rethink their products and marketing strategies to better compete.

This “prestige-ifying” is happening, in part, by necessity. More retailers are offering low-cost private label products than ever before. That amped up competition has pushed companies that make and sell these items to differentiate their store-brand lines on more than just price. About 53% of shoppers said in 2023 that store brands are very or extremely important in their store choice, according to NIQ, up from 35% in 2016.

As such, some of the biggest U.S. retailers, including Walmart Inc., Target Corp. and Costco, have spent recent years pouring money into expanding and improving their in-house offerings to do just that.

When Walmart launched Bettergoods over the spring, for example, it wasn’t trying to make “national-brand equivalents,” said Scott Morris, senior vice president of private brands, food and consumables at the retailer. The company instead wanted to create trend-driven products.

To research and conceptualize the line, the retailer sent product developers on “trend trips” throughout the world to better understand what people were eating, Morris said. The goal was to decide what to launch and also how to elevate those items.

Shoppers can now find more than 300 items under the Bettergoods label. The packaging often looks like something you’d find at Whole Foods Market and boasts specialty ingredients from faraway locales. Its “Authentic French Macarons,” for example, come from a family bakery in France that dates back to 1936. For holidays, it’s offering seasonal sprinkles “made with plant based colors” and gluten-free gingerbread mini nut bars. About 70% of the line’s items sell for under $5, Morris said.

Costco takes a two-pronged approach to adding to its Kirkland line, Gary Millerchip, the company’s chief financial officer, said. The retailer looks for gaps in price or quality among products already on the market. Kirkland’s sweet spot is when it can offer something as good or better than national brands with a price that’s at least 20% lower, he said.

Additions to the Kirkland lineup this year include men’s “Hoka-style” walking shoes and organic golden maple syrup.

“It’s not like we’re necessarily trying to be the first one” to market, Millerchip said.

Kate Kimmerle, who runs a business developing private-label beauty products, says big-box stores, grocers and major drugstore chains now come to her with “aspirational” items they want her to develop for their in-house brands. She’s created copycat versions of Laneige $24 lip sleeping masks that retail for between $5 and $10 and similarly priced versions of serums that can cost upwards of $150. For the next holiday season, she says she’s making around triple to quadruple the seasonal items as in years past.

“Traditionally, it was an unsexy business,” she said. “Now, it’s cool to have dupes.”

Such investments are worthwhile for retailers because private-label products tend to have larger profit margins than name-brand ones. These upgraded brands are helping grow sales volume, too.

Bettergoods is boosting Walmart’s grocery business, Morris said, by bringing in shoppers who haven’t bought private-label products from the retailer before. It’s also attracting a higher-than-expected number of coveted Gen Z and affluent shoppers. Kirkland is now a $50 billion brand and growing at a faster rate than the rest of Costco’s business, according to Millerchip.

These moves are also paying off just as inflation-battered U.S. consumers enter the holiday shopping season on the hunt for deals.

Earlier this fall, Alyssa Monaye bought Costco jewelry for the first time when she treated herself to a $700 ring that looks nearly identical to a $7,600 one from Van Cleef & Arpels. She thinks the retailer’s jewelry, like its $4,000 12-piece box set, would make a great gift for the holidays. “The quality is great for everyday,” she said.

High grocery prices have Jamie Koll stocking up on almond flour, coconut flour, sugar and maple syrup from Whole Foods and Trader Joe’s store brands for her holiday baking.

“There just have been so many cost increases for food,” said the 32-year-old who lives in Austin. While inflation has cooled, grocery prices are up 1.6% from last year, according to U.S. government data. Through her own testing and baking, Koll has found store brands often have the same ingredients as pricier competitors and work just as well.

Though, she’s not always impressed. She still recommends Vital Farms pasture-raised eggs and Spindrift over store-brand eggs and seltzer.

“Not every private-label product and brand that I try is a win,” she said.