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

haymarket said:
I know two people who own service stations. One whose family has been in the business for over forty years in the same location. Both tell me that they make their big money off the sale of the hundreds of other items that they sell which includes everything from breakfast sandwiches to candy to soda pop to magazines to milk and bread. They do make money off gasoline but not as much. And they both admit that they set prices determined by the competing stations closest to them. It is NOT customers which determine their prices but a combination of the major oil companies and their competition.

The older one said that years ago, when they had two service bays, that is where the big profits came from but today the same space yields more profit per square foot in the afore mentioned items.
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Yes most gas stations do make more on the store portion, that is why you don't see to many with garages anymore, but most people don't pick which gas station they use based on the prices of the junk food in the store portion. They choose it on the price of the gas.
 
iliveonramen said:
Publix rocks! Best subs on the planet and I'm more than willing to pay a bit extra for a clean store with happy employees.
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Costco is even better. Clean store, happy employees, AND ridiculously amazing prices.
 
Heebie Jeebie said:
Yes most gas stations do make more on the store portion....
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Most gas stations make less than 10-20 cents on a gallon of gas. Its a safe bet that 70-90% of their profits come from the store.
 
MaggieD said:
Well, I don't believe it. I don't know how they arrived at "the typical Costco employee makes $45,000 a year," but I don't buy it. I don't care what the survey shows.
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why not?
 
Samhain said:
Most gas stations make less than 10-20 cents on a gallon of gas. Its a safe bet that 70-90% of their profits come from the store.
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I don't disagree. What I'm saying is most people pick which gas station they use based on the price of the gas not the price of the stuff in the store. That is why gas prices a usually the same in an area.
 
Jredbaron96 said:
why not?
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Average Assistant Cashier: $11.82/hour
Average Stocker: $12.59/hour
Average Cashier: $15.79/hour
Average Demo Services: $11.82/hour
Average Food Demo: $11.00/hour
Average Warehouse Demo: $23.35/hour

$45,000/year would indicate an average of $21.63 hourly. It's just not there.

costco Salary | Glassdoor
 
ocean515 said:
I like Costco. I've been a supplier to Costco.

How do you think Costco is able to have those rediculously amazing prices?
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Please. Their prices are hardly ridiculously amazing. :rofl
 
ocean515 said:
I like Costco. I've been a supplier to Costco.

How do you think Costco is able to have those rediculously amazing prices?
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Because they sell in huge bulk. Remember when I said I got nearly 4.5 pounds of choice sirloin steak for $20? Well they ONLY sell sirloin steak in ~4.5 pound packages.
 
MaggieD said:
Please. Their prices are hardly ridiculously amazing. :rofl
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They sell meats a grade higher for a cheaper price then anything you buy at Walmart. You seriously can't beat that.
 
ReformCollege said:
Because they sell in huge bulk. Remember when I said I got nearly 4.5 pounds of choice sirloin steak for $20? Well they ONLY sell sirloin steak in ~4.5 pound packages.
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Yes, that is part of it. However, if you're a supplier to Costco, you have to be able to meet their purchase demands 100% of the time. If another supplier comes along with a better price, you're out. Sounds fair, however, what would a supplier do with all the inventory they had built up to meet that demand.

As I wrote, I like Costco, but their buying floor in Issaquah is littered with the carcases of suppliers destroyed by their purchasing department.

I've told many company owners I know that they are making a pact with the devil when they sign on with Costco. The volumes are tremendous, and the profits slim, but when they get dropped, they better not be holding the bag for plant and personnel expansions they made to meet the volume, because it could destroy them.

Believe it or not, this is some behind the scenes truth about Costco.
 
MaggieD said:
Well, I don't believe it. I don't know how they arrived at "the typical Costco employee makes $45,000 a year," but I don't buy it. I don't care what the survey shows.
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The survey might not be off if one is dealing with total compensation (wages + benefits). At last word, Costco had 160,292 employees worldwide. Its selling and general administrative expenses (primarily salaries and wages according to Note 1 of the financial statements) came to $9.518 billion. That would translate into a mean figure of $59,379 per employee.

However, that figure is likely skewed, as certain key employees receive far more compensation than the average worker. SG&A expenses also are comprised of other items. But even with a 25% reduction in the SG&A figure to account for those other items, one still comes close to $45K per employee.

Sources of data:
Costco - Company Profile
Form 10-K
 
donsutherland1 said:
The survey might not be off if one is dealing with total compensation (wages + benefits). At last word, Costco had 160,292 employees worldwide. Its selling and general administrative expenses (primarily salaries and wages according to Note 1 of the financial statements) came to $9.518 billion. That would translate into a mean figure of $59,379 per employee.

However, that figure is likely skewed, as certain key employees receive far more compensation than the average worker. SG&A expenses also are comprised of other items. But even with a 25% reduction in the SG&A figure to account for those other items, one still comes close to $45K per employee.

Sources of data:
Costco - Company Profile
Form 10-K
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Donald.

I hate it when you set me straight.

Don't stop.

Edit: ;) ;)
 
poweRob said:
Ever been in a Trader Joe's? Small stores PACKED to the brim with employees. They tend to not have an overnight shift and stock during the days so that you always have someone nearby to ask for help rather than running down loads of aisles trying to find someone who may or may not know where something is. Also, you damn near never see an empty unattended cash register.

Unlike my Albertson's grocery store here where you can't find a soul in the store except the two or three at a cash register and at 5:30pm when the lines back up down the store's aisles due to the after work rush. Then of course you go to the customer service counter for something and no one is ever there and they have to be paged.
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I work at Trader Joe's and I can definitely say that that is true. We are always packing stuff during the day and then packing even more stuff when the truck comes in at night. Yet, in places like Trader Joe's, we do have something of a night shift, the store closes at nine and we unload and work the stuff from the truck until midnight.
 
ocean515 said:
Yes, that is part of it. However, if you're a supplier to Costco, you have to be able to meet their purchase demands 100% of the time. If another supplier comes along with a better price, you're out. Sounds fair, however, what would a supplier do with all the inventory they had built up to meet that demand.

As I wrote, I like Costco, but their buying floor in Issaquah is littered with the carcases of suppliers destroyed by their purchasing department.

I've told many company owners I know that they are making a pact with the devil when they sign on with Costco. The volumes are tremendous, and the profits slim, but when they get dropped, they better not be holding the bag for plant and personnel expansions they made to meet the volume, because it could destroy them.

Believe it or not, this is some behind the scenes truth about Costco.
Click to expand...

Sounds like suppliers are fighting to supply to Costco. And you think something is wrong with that?
 
ReformCollege said:
Sounds like suppliers are fighting to supply to Costco. And you think something is wrong with that?
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Not at all. Just thought it might be interesting to understand how Costco goes about doing business.

While it's own employees certainly seem pleased to work there, the former employees of it's suppliers would likely have a different view.
 
MaggieD said:
Average Assistant Cashier: $11.82/hour
Average Stocker: $12.59/hour
Average Cashier: $15.79/hour
Average Demo Services: $11.82/hour
Average Food Demo: $11.00/hour
Average Warehouse Demo: $23.35/hour

$45,000/year would indicate an average of $21.63 hourly. It's just not there.

costco Salary | Glassdoor
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Costco also gives out twice a year bonuses where employees get anywhere from $3-6k each bonus. At least that is what happens at the 2 Costcos in the Reno, Nv area.
 
ocean515 said:
Not at all. Just thought it might be interesting to understand how Costco goes about doing business.

While it's own employees certainly seem pleased to work there, the former employees of it's suppliers would likely have a different view.
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Then why did you continue to do business with Costco? Obviously Costco offered a better deal with high volume and low margins then getting better margins and a lower volume from another competitor. Which is why the suppliers were fighting to supply the company.
 
#1 you should support the economic freedom of people to pursue business in most any way they see fit (within reason). One person pays a lot, the other doesn't, you should IMO ethically support both in terms of law/policy. If you do not, you've got issues. Yes you can personally NOT agree with such pay rates be they high or low, but this must IMO be secondary to your support of economic freedom. Some like vanilla, some chocolate, some people like a confrontational work place, some do not, some people like working long hours to get ahead, some do not. Anyone of you, including me, proclaiming from high on the mountain that our way should be codified in national law and handed down to the worshipers as law, have yet to be enlightened.

#2 Businesses should be observed to have variance both as routine good competitive practice to differentiate oneself in the marketplace, and as a sign of a healthy market. Some companies choose to build a business model around high salaries and benefits, and if it works for them, OK, great. Some choose absolute bare minimum pay/benefits, if it works for them, OK great. The idea that uniformity, centrally planned or dictated models, would be tragic ethically and economically.

Rejoice that we have thriving competitive aspects of our market. If you love the high pay/benefit type jobs:
a. join one
b. create one
c. invest
etc.
 
Heebie Jeebie said:
Yes most gas stations do make more on the store portion, that is why you don't see to many with garages anymore, but most people don't pick which gas station they use based on the prices of the junk food in the store portion. They choose it on the price of the gas.
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But that is my point. Why would three gas stations at the same intersection all keep their price the same if the entire idea is to entice customers with a low price? None of the three are any lower than the other. They are clearly engaged in artificial price fixing.
 
MaggieD said:
Average Assistant Cashier: $11.82/hour
Average Stocker: $12.59/hour
Average Cashier: $15.79/hour
Average Demo Services: $11.82/hour
Average Food Demo: $11.00/hour
Average Warehouse Demo: $23.35/hour

$45,000/year would indicate an average of $21.63 hourly. It's just not there.

costco Salary | Glassdoor
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Maggie... do you really think its fair of you to work this out in actual numbers? If this kind of thing catches on here people will soon be asking for asking evidence to support ones posts.
 
ReformCollege said:
Then why did you continue to do business with Costco? Obviously Costco offered a better deal with high volume and low margins then getting better margins and a lower volume from another competitor. Which is why the suppliers were fighting to supply the company.
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I would think the answer was rather obvious. I determined the volume I was doing would not hurt me when it stopped.

I originally did business with Price Club, the company that pioneered the club business. Costco eventually merged with Price Club and was then known as Price-Costco. Eventually they dropped the Price name.

One product I supplied to them had it's highest sales around the holidays. Common for most businesses is the fact they can't manufacture sufficient numbers of products during November and December due to the holidays. That means they build inventory during the summer to carry them through.

After 7 years of doing business, Costco dropped my product with one week notice, 3 weeks before the increased holiday shipments were to start. That was a $2 million hit they had no problem wipping their hands from. They didn't care about the existing inventory, or the special nature of the products involved. Now, that's the way it goes. It's business. Very cold way to do business, and many, many suppliers have been destroyed by the Costco way of doing business. I was big enough to absorb it and move on, but imagine how nice it would have been to lay off employees at Christmas.

Costco is nothing more than another big business. Somebody always pays, and for Costco, it's their suppliers. Again, there is a vast sea of ruined businesses out there who got carried away with the idea of doing business with them.

That's my experience. Again, I like the company, but this pedestal stuff is a bit much.
 
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