Costco Seeks Search Engine Optimization for Store Brands

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December 13, 2011

Despite struggling to control costs in the face of inflation, Costco Wholesale finished its first fiscal quarter with higher sales and earnings, and a plan to rework its website to deliver better results from search engines that currently fail to recognize the store’s Kirkland brand.

“We are in the process of re-platforming Costco.com,” said Richard Galanti, executive vice president and CFO, during a conference call with analysts. Thanks to an outdated platform, Costco store brands, including Kirkland Signature, do not come up high in search results.

“Right now the search engines can't search on our site. If you punch Kirkland Signature into Google, you're going to go a ways down before you see Costco.com,” he said. “That's because we have an old system. There are some simple things that we're doing that will happen sometime in the second calendar quarter of next year.”

Delivering better returns on searches for Costco store brands is expected to help grow the company’s online business, according to management. Online sales were up 9 percent for the quarter, lower than the same period the prior year.

Store brands penetration also slowed somewhat compared to the peak of the economic crisis in 2008 and 2009, said Galanti, describing the chain’s private label program as slowly evolving. “Right after the financial crisis of late 2008, in the first six months of 2009, we saw up to a 300-basis-point increase in the sales penetration of private label in the food and sundries side of our business, which is 60 percent of our business -- and that's unprecedented,” he said.

Since then, private label penetration has grown 50 to 100 basis points a year, and while the first quarter showed slower growth, Costco is still on track to achieve its annual goals of growing store brands sales at that level.

However, Costco’s goal of achieving store brand penetration to the mid- to high-30 percentile range is still a goal, but a distant one. “That's going to take time,” said Galanti.

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