2 Retail Trends Costco Is Focused On

In the following video, the Fool's Austin Smith chats with Craig Jelinek, Costco's new CEO. Jelinek joined the company as a warehouse manager in 1984 and quickly rose to become a regional manager. After moving through various executive posts over the years, he became president and COO in 2010 and took over from longtime CEO Jim Sinegal in January 2012.

Organic, Craig says, is here to stay, and Costco -- as always -- is looking at how to provide the best possible price in this high-demand market. The private-label business is also promising, as long as consumers trust the name.

To watch the full interview, click here.

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Austin Smith: You guys obviously participate in a huge spread of the retail space -- electronics and jewelry and food, as you mentioned. What are the biggest defining trends in retail that you guys are seeing going on today? Is it private-label consumption, is it organic consumption, that investors may want to get ahead of, if they see these changes happening?

Craig Jelinek: Well, there's two things. Organic, in my view, is here to stay. But also, organic is also very expensive. Our view is to figure out, always, how to bring organics at a better value or a better price to the marketplace. Kirkland Signature, we're looking at Kirkland Signature organics. We're looking at being able to do that.

I think both. I think the private label or controlled label, as long as it's quality, is going to become a bigger part of the business, because I think, more and more, brands ... not so much in the non-food that they'll be big, because brands are still very important because there's so much advertisement out there on brands.

Smith: On the foods end?

Jelinek: No, non-foods. But on the food part of the business, I think more and more if there's trust in the house that sells it, there'll be trust in the brand. I think that's one of the things that we've got going for us, that we've got trust in there in the Kirkland Signature name.

If you look at that name, it's just not in a few items. That Kirkland Signature is from diapers to luggage to meat to vitamins. It's a pretty brand name that covers a lot of merchandise, so you have to be careful to make sure that you protect the integrity of every item that you sell, so you don't lose the reputation on that Kirkland Signature brand.

Smith: Makes a lot of sense.

Jelinek: But we've been able to protect it, and I think there's a lot of confidence in the Kirkland Signature. When we first went to it about 22 years ago, it was very slow, but now anything that we put Kirkland Signature brand on, people are not concerned about trying it.

Smith: Do you see any other big paradigm shifts in retail, that we didn't talk about, just as you observe the landscape?

Jelinek: You know, like I said, I think you're going to probably see a lot more organics. I think people, particularly depending on what economic level they are, are going to buy healthier, cleaner ingredients. I think organic produce is very big for us.

The problem is, if we just dealt in organic produce we would never have enough produce to get by in a given week, let alone a year. It's all about availability. I think over time you'll see, probably, more production being shifted to organics, but that's going to take time.


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