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Costco's Profit Soars To $459 Million As Low-Wage Competitors Struggle

Costco is a good example of a company that is successful not by exploiting their workers, but by treating them well.

In N out burger is another good example. They typically pay 2-3$ an hour higher than the competition. As a result, they get better employees who will work hard to keep their job because they know that if they lose their job and go elsewhere they will make less. The typical fast food worker has no incentive to work hard because they can just go to the next place if they lose their job. See....that's what a number of companies don't understand. You can be successful AND treat your employees well at the same time.

Henry ford figured that out a long time ago. It seems to have taken some businesses a lot longer to catch on.
 
Actually here's the lesson... from Forbes:

“One lesson that emerges from the experience of low-end retailers is that putting workers in crummy, low-wage jobs tends to yield crummy service as well. McDonald’s earnings have fallen, the Wall Street Journal reports, and a management webcast to franchise owners acknowledged that customer dissatisfaction is rising in part because “service is broken.” Myerson adds, “Some of the most successful retailers follow a different path. As MIT management professor Zeynep Ton argued in Harvard Business Review last year, Costco and Trader Joe’s pay their workers far more than many of their competitors, offer their employees opportunities for promotion and enjoy markedly lower worker turnover and far higher sales per employee than their low-road counterparts. Sales per employee at Costco are nearly double that at Sam’s Club.(emphasis added)”​


Right, so the point is that to be able to afford paying employees more money they have to employ fewer people. TA DA!! Vive la revolution!

Edit: Oh, and carry higher end products than they currently do because poor people in the store are bad for business...
 
If paying people better wages makes for a more profitable company someone will do just that and go toe to toe with Walmart and take over their business. That is the beauty of free enterprise, the best business model wins.
 
If paying people better wages makes for a more profitable company someone will do just that and go toe to toe with Walmart and take over their business. That is the beauty of free enterprise, the best business model wins.

Exactly, and it appears that Costco's business model is winning.
 
Exactly, and it appears that Costco's business model is winning.

To say their model is winning you have to compare them to a similar enterprise. I don't think them and Walmart are competitors but as I said if someone uses the Costco model to compete with wally world and wins, more power to them. To the victor goes the spoils.
 
I like Trader Joe's too. They have good stuff, and at roughly the same price as discount grocery stores. Some of their store brands are actually better than the name brands. I buy almost all of my breakfast cereal there.

Ever try their store brand beer?

I'm not sure what they pay their employees, but they seem contend and, more importantly, competent.


The starting pay at Trader Joe's for a full-time employee is between $40,000 and $60,000 a year, more than twice what some of its competitors offer.
link...

I haven't tried their beer though. Their veggies are quite nice.
 
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Right, so the point is that to be able to afford paying employees more money they have to employ fewer people. TA DA!! Vive la revolution!

Edit: Oh, and carry higher end products than they currently do because poor people in the store are bad for business...

Their prices beat Sam's Club. Nevermind that though... you may continue destroying your own strawmen.
 
Further examples within the same industry would be Whole Foods and Publix, they are excelling in growth and profits while maintaining good wage levels for employees.

Examples in the other direction where wages are low and profits are dropping would be Target, Lion Foods and Albertson's.
 
I can see the morale argument... productivity though?.. not so much.

whether I go into Costco or Walmart, the shelves are stocked and people help me find stuff....I doubt you'll find differing levels of productivity.

what I usually find at Walmart, as opposed to Costco, is ...employees.
there's lots of employees running around Walmart... not nearly so many running around Costco.... customer service is not their schtick.( it's a retail versus wholesale difference)

Its easy to have lots of employees when you pay them minimum wage and only a handful of them work full time.
 
So much for the notion our economy is being destroyed because lazy Americans are overpaid. Not to mention, unlike WalMart, Costco employees don't qualify for food stamps and soak up $2.66 billion in taxpayer subsidies to run their business. Amazing ain't it?

Costco's Profit Soars To $459 Million As Low-Wage Competitors Struggle

A typical Costco worker made $45,000 in 2011, according to Fortune. That’s compared to Sam’s Club workers’ average salary of $17,486 per year, according to salary information site Glassdoor.com. Walmart has also been the target of protests by some of its workers, who are protesting what they say are the company’s low wages.

The big box giant's profit jumped 19 percent to $459 million last quarter, thanks in part to the company’s efforts to offer discounts to lure more members, according to Bloomberg. The company was able to offer those discounts and boost its profits while paying its workers a decent wage, a claim many of Costco’s competitors can’t make.

Nor can Costco's competitors claim growth quite like the wholesale retailer. Walmart’s sales suffered last quarter as shoppers struggled with a delay in their tax refund checks and a payroll tax hike. The company’s Sam’s Club unit, which is comparable to Costco, contended with similar obstacles in 2012.

Target, another Costco competitor, lowered its earnings forecast for the year, after customers cut back, pushing the retailer’s profits down 29 percent.​

A person/business needs to be a member to shop at Costco. Costco is a wholesale outlet for members only - your average "Joe" just cant come in off the street and shop there without paying a membership fee (Join Costco).

The only "competition" Costco has is Sams Club.

Using Costcos "bragging" that they have 50,000,000 members at $55.00 minimum for a membership that is 2.75 billion in revenue just on a subscription basis.

That's how Costco makes its money.
 
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I've shopped at Costco and Sam's Club for quite a long time. I usually choose which by the proximatey to where I'm living. In all honesty, I've never really noticed much difference in service or quality of goods. Both have pretty good meat and produce departments. Overall, they're both pretty good. I do like Kirkland brand booze (their vodka is Grey Goose and scotch is Macallan :mrgreen:), but thats really a niche aspect of Costco.


So they have different business models, so what. If thats that important to you, pick one over the other.
 
The starting pay at Trader Joe's for a full-time employee is between $40,000 and $60,000 a year, more than twice what some of its competitors offer.
link...

I haven't tried their beer though. Their veggies are quite nice.

Trader Joe's has great food, but I get claustrophobic in there. Its just too damn small. I send my wife in there alone, but I prefer Aldi. They both have the same general business plan(internal marked goods), with Trader Joe's going for the "Joe" name on everything and Aldi doing generic.

Most of the food is the same between the two, just packaged different.
 
$459 million is entirely too much profit, they could get by with half that much profit and remove the membership fee that keeps out normal working class people.
 
Henry ford figured that out a long time ago. It seems to have taken some businesses a lot longer to catch on.

Ford paid his employees more because the cost of training replacements got to high. He didn't do it out of the goodness of his heart.
 
$459 million is entirely too much profit, they could get by with half that much profit and remove the membership fee that keeps out normal working class people.

Yup, that $5 a month membership fee is waaaay to burdensome for "working class people"

Unless you're being sarcastic. Then, its pretty funny.
 
Their prices beat Sam's Club. Nevermind that though... you may continue destroying your own strawmen.

Just adding another reason why Sam's and Walmart aren't doing as well as Costco.

Also, Walmart/Sam's employs 2.2 million people to Costco's 175,000... so Costco can't even beat the decimal. So there is Walmart's solution. Fewer stores, fewer employees.

There are better ways of making the argument that the original articles attempted to make. You can do a more direct comparison of the payroll costs of low versus high salary at Sam's/Walmart and Costco which is entirely valid, but there is SO much uncharted ground between payroll and sales that it is entirely stupid to make such a spurious argument.

Other things to consider in a Sams-v-Walmart comparison is store locations. Given that these stores are not all stacked on top of one another there is a difference in clientele that needs to be considered. Or narrow the comparison to Sam's and Costco stores that actually do server the same communities.

On the pricing, here is a good chart (you'll like it, it almost says that Costco wins on cost): Sam's -v- Costco comparison

But in reality, what that table says is that you buy baked goods from Costco and almost everything else from Sam's. But the other interesting thing is that Costco really only wins on scale. Their total cost is higher than Sam's, but their item count per box is higher allowing them to squeak out a win on groceries, but then THAT price victory comes more from the manufacturer and the economy of scale than from something as disconnected as employee wages. In fact, in the items where you do the economy of scale trick (furniture, TVs etc.) Sam's Club beats them hands down. But on that table the winner on all proce comparisons is almost invariably the won who sells more-per-package.

So, Sam's fix isn't wages, it's to sell bigger bundles. But then not everyone needs a 2 gallon can of beefarino...

In other words, the HuffPo article is stupid, makes stupid claims it doesn't even attempt to back up, and calls it a day. They try to unsupported claim that people shop more at Costco because of... employee salaries. This just falls into the ever growing category of spurious liberal arguments that if acted on would make things far worse for the people they are trying to help.
 
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The problem with all of this is that there is no proven correlation between the company's performance numbers and its wages. It had an increase in profit WHILE paying people better, not necessarily BECAUSE OF paying people better. There could be any number of other factors involved. I'm not against paying people more and I'm not against Costco. I'm just against a partisan article fitting facts to an ideology.
 
The problem with all of this is that there is no proven correlation between the company's performance numbers and its wages. It had an increase in profit WHILE paying people better, not necessarily BECAUSE OF paying people better. There could be any number of other factors involved. I'm not against paying people more and I'm not against Costco. I'm just against a partisan article fitting facts to an ideology.

Well right. Some factors to better pay---less turnover, less retraining, better socialization into the company culture--assuming the company culture is both valid and good for business.

Wal-Mart has a problem within its company culture imo, on a variety of levels.
 
Well right. Some factors to better pay---less turnover, less retraining, better socialization into the company culture--assuming the company culture is both valid and good for business.

Wal-Mart has a problem within its company culture imo, on a variety of levels.

I don't know. I don't like Walmart and I don't shop there. I have always believed that contrary to the old saw of companies being too big to fail, I tend to think some companies are too big to succeed.
 
Actually here's the lesson... from Forbes:

“One lesson that emerges from the experience of low-end retailers is that putting workers in crummy, low-wage jobs tends to yield crummy service as well. McDonald’s earnings have fallen, the Wall Street Journal reports, and a management webcast to franchise owners acknowledged that customer dissatisfaction is rising in part because “service is broken.” Myerson adds, “Some of the most successful retailers follow a different path. As MIT management professor Zeynep Ton argued in Harvard Business Review last year, Costco and Trader Joe’s pay their workers far more than many of their competitors, offer their employees opportunities for promotion and enjoy markedly lower worker turnover and far higher sales per employee than their low-road counterparts. Sales per employee at Costco are nearly double that at Sam’s Club.(emphasis added)”​

Here's a another thing the former CEO, I don't know about the current one, made just under 12 time the salary of his LOWEST paid employee. That says something about the leadership of the company. I have two Costco's near me and many of the employees that work there have been there for over a decade. There's that little turnover.
 
Comparing Costco to Walmart is comparing apples to oranges it is not a fair comparison and very disengenerious, Walmart does not charge you up to 110 dollars a year to shop there. Second you cant go onto Costco and buy one can of beans unless you want to feed 12. and third Walmart has a store in almost every town in America bigger cities have dozens,

So lets do a fair comparison Sams Club to Costco
fond a site who did it for me
Sam's vs. Costco Verdict
its more expensive to shop at Costco their membership is more expensive and so is their merchandise

so the fact still hold true to pay your employees more your prices will be higher
 
Comparing Costco to Walmart is comparing apples to oranges it is not a fair comparison and very disengenerious, Walmart does not charge you up to 110 dollars a year to shop there. Second you cant go onto Costco and buy one can of beans unless you want to feed 12. and third Walmart has a store in almost every town in America bigger cities have dozens,

So lets do a fair comparison Sams Club to Costco
fond a site who did it for me
Sam's vs. Costco Verdict
its more expensive to shop at Costco their membership is more expensive and so is their merchandise

so the fact still hold true to pay your employees more your prices will be higher


as it should be, instead of continuing on this road to the bottom ...
 
Ford paid his employees more because the cost of training replacements got to high. He didn't do it out of the goodness of his heart.

No one does business out of the goodness of their heart. They do it for profit.

Some are better at it than others, as we've seen in this thread.
 
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