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Future of Costco's KS 11 Hearing Aids

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Edited

Earlier this week, I went to Costco to have my KS 7 hearing aids cleaned and checked out (something I do periodically). I asked if there was any news about new KS 11 aids. The reply was, “there isn’t any news, because the manufacturer’s prices are now so low that Costco doesn’t need to have its own brand.” I did not ask any follow up questions, but my interpretation is that Costco created its own brand in order to offer its customers a reason priced hearing aid and now that is no longer necessary. Keep in mind that this may have been speculation on the part of the person I talked to and not real “insider news.” Anyway, I thought I would share since I never heard this explanation before.

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This makes sense to me. I’m not expecting a KS11, but I don’t rule out anything.

My recent visit to my local Costco resulted in a totally different answer. According to my hearing aid specialist, his hopes for a KS 11 are high. Of course, I feel most have their own opinions.

That explanation seems dubious. The Lone Ranger and Tonto have completed their work and it’s now time to ride off into the sunset, what?

There was a sudden, unannounced discontinuation of both the Kirkland and branded Phonak product. If the Lone Ranger (Kirkland brand) had completed its work why would the branded Phonak product, likewise, be removed? This makes no sense to me.

Hearing aid prices have not been driven down to the level where pricing is moot - if nothing else, just look at Costco’s other offerings, hundreds higher than the KS10s.

There are numerous back stories and rumors regarding a falling out; hearsay is usually off base but often where there is smoke there is fire. Costco hearing aid personnel in both stores I’ve visited are mumbling about a falling out.

When I started getting hearing aids at Costco, their branded hearing aids were about $2500 a pair and the “generic” Kirkland (KS7) was $1699 a pair. Currently branded hearing aids at Costco start at $1599 a pair. Discontinued KS10 sold for $1399 a pair. Although still less expensive than least expensive branded hearing aid, the difference has shrunk notably.

I think Costco will be offering KS11 it is just a matter of time (I hope).
KS10 has been withdrawn because of charging issues (that’s my understanding), but I think it is for more than that, otherwise they could have fixed the charging issues and resumed selling KS10.
Why do I think there should be a KS11, because Costco already have the infrastructure (audiologist) to fit them and it is another source of revenue.
Is it going to be Phonak? I doubt it.
My 2c

Edited

Another 2c: I am guessing that after losing their heavy-hitter/Phonak they will lean on GN ReSound;

In reply to @Baltazard

@Baltazard said:

Why do I think there should be a KS11, because Costco already have the infrastructure (audiologist) to fit them and it is another source of revenue.

Once again, it is not a source of revenue, it is a loss like the chickens. Although I do expect the chickens to continue but the price may go up.

Hearing anyone who works at Costco say that manufacturers prices are so low that Costco themselves doesn’t need its own brand sounds kind of silly. You know that Costco’s prices for hearing aids were lower than the other brands that were provided, so why would you then say that hearing aid prices are low? This interpretation of the person who said that is heavily flawed. It makes it sound like they’re getting paid to push other hearing aids now.

Especially considering that I paid around $800-900US for my KS9’s ($1,100 CAD) and the KS10’s dropped in price compared to the KS9’s AND had rechargeable batteries. The prices of the other hearing aids advertised maintained the same cost throughout.

As a former small, investor I used to follow Costco financials closely. It is well known that the hearing aid department has never been profitable. There are regular calls from shareholders to close it.

I remember hearing the same thing about hot dogs years ago. Hopefully hearing aids are as important to the powers that be.

In reply to @Psych1

“It is well known” and a couple of bucks will get us a cup of coffee.

I’ve been an investor in Costco stock for over 25 years. I know a great deal about Costco. I know of no published figures or statements by management that lead me to believe that the department is some sort of a loss leader.

Costco’s policy is generally one of not using loss leaders. Now, it’s easy to speculate that a $4.99 rotisserie chicken or a buck fifty hot dog and beverage are loss leaders, and there is no shortage of such speculation. The facts are that Costco went into the chicken farming business in order to hold its prices on the rotisserie chicken and changed from Hebrew National hot dogs years ago for the same reason. So it’s clear that Costco has worked hard to maintain pricing. Further, I have never seen Costco comment on things like profit margins on chickens, hot dogs or… hearing aids.

Costco used to generally work on a model of 13% gross margin, and I believe that was pretty much across the board - unbelievably thin margins. They can work on such thin margins in part because their annual membership fees add a ton to their bottom line. Hearing aids are a loss leader? Where’s the evidence?

I am on my fourth Costco Kirkland Signature Hearing aid my experience has been good. I expect there are many people like myself which means KS Hearing Aids have a now well established brand name. Brand names are valuable and I do not see Costco abandoning KS Hearing Aids. If they do I will be disappointed at losing good quality, good price hearing aids.

@Mickey said:

KS Hearing Aids have a now well established brand name

I disagree! I have had Resound KS6 and Rexton KS8. There was a vast difference. I should have returned the KS8 for something else especially since Rexton refused new firmware to be compatible with the iPhone and OS released at that time. I suffered for 3 years with them and now have Oticon More 1 aids.

In reply to @Mickey

@Mickey said:

Costco abandoning KS Hearing Aids. If they do I will be disappointed at losing good quality, good price hearing aids.

But Costco is still selling premium models at a very reasonable price, I wouldn’t give too much weight to the KS Kirkland brand if it doesn’t come back.

Edited

Having a neighbor who is a buyer for Costco, I do know one thing. The KS11 was to be a Phonak Lumity. Costco insisted that Phonak again lower the price so they would sell for $1299. I believe the last 3 or 4 models each dropped $100 when new ones released.

As for the future, I’ve been told “loose lips sink ships”. So we’ll see.

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