When I first joined Costco 20 years ago, I was a little skeptical about being able to recoup my membership fee in the form of savings. But my attitude changed the first time I filled up my car and realized how much cheaper Costco’s gas is.
Costco is typically able to charge about 30 cents per gallon less than most local gas stations, according to CNN. And part of the reason the warehouse club giant is able to undercut competing gas stations is that it uses fuel as a loss leader.
A big benefit to Costco of offering cheap gas is that it gets shoppers into the store. From there, members are more likely to browse the aisles, load up on impulse purchases, and spend more.
Costco also has more leeway to charge less for gas because it collects so much revenue each year in the form of membership fees. During Costco’s most recent quarter, the company reported membership fee revenue of $1.37 billion.
Costco also reported strong sales growth for the quarter, and gas sales played a meaningful role in that.
“Our focus is providing quality goods and services at the lowest possible price continues to resonate strongly with our members,” said Costco CEO Ron Vachris during the company’s third quarter 2026 earnings call. “Nowhere has this been more apparent in the third quarter than our gas business.”
But while cheap gas may help bring shoppers through the door, it’s not Costco’s only competitive advantage. The retail giant has another weapon that reaches far beyond the gas station and may be even more important to its long-term success.
Costco’s Kirkland brand is a huge draw for members
While offering up low gas prices certainly helps Costco retain and attract members, the company’s private-label Kirkland Signature brand is perhaps even more important to the company’s success.
Kirkland Signature has actually evolved into one of the most successful private-label brands in retail. Many Costco members actively seek out Kirkland products rather than viewing them as lower-cost alternatives to national brands. And there’s a reason for that.
Related: Costco grows big advantage over Sam’s Club
Kirkland products are known not just for their low prices, but their high level of quality. So members know that when they buy a Kirkland product, they’re not trading down or settling for something that’s sub-par.
“Quality. Reliability. Focus. Costco has strategically approached Kirkland Signature in a way most other retailers have not,” retail expert Michael La Kier told RetailWire.
Retail expert Zel Bianco echoed those sentiments.
“Quality products like those from Kirkland are just as good as national brands and for the most part less expensive…Given that so many families are struggling with the crazy high prices of almost everything they need today, it’s no wonder that Costco and the Kirkland brand continue to grow.”
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Costco’s investment in Kirkland is a huge benefit to members
It’s clear that Costco enjoys a lot of success with its Kirkland Signature line. But a big reason it’s been such a hit is that Costco continuously invests in its store brand to offer not just high quality products, but innovative ones.
During Costco’s most recent earnings call, CFO Gary Millerchip said, “Kirkland Signature is also driving growth in food and sundries. We continue to innovate with new KS items, offering savings of at least 15% to 20% to the national brand equivalent with equal or better quality.”
One of the new Kirkland items Millerchip referenced that hit the shelves at Costco recently was Kirkland Signature Beef Sticks.
As consumers increasingly look for snacks that are healthier and heavier in protein, Costco responded with a private-label offering that, as Millerchip put it, offers “tremendous value” to members.
Costco also recently launched its Kirkland Signature Ultra-Filtered Reduced Fat Milk. The product is packed with extra nutrients and protein and is said to be easier to digest than traditional milk.
Vachris said the new milk “has just taken off extremely, extremely strong.”
All told, the Kirkland Signature brand is a big reason members get their money’s worth when they join Costco. While low gas prices may get customers into the parking lot, Costco’s exclusive brand may prove to be an even stronger competitive weapon than the discounts available at the pump.
Maurie Backman owns shares of Costco.
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