Costco Trumps Walmart!

But there’s another company that is breaking the Wal-Mart mold: Costco Wholesale Corp., now the fifth-largest retailer in the U.S. While Wal-Mart pays an average of $9.68 an hour, the average hourly wage of employees of the Issaquah, Wash.-based warehouse club operator is $16. After three years a typical full-time Costco worker makes about $42,000, and the company foots 92% of its workers? health insurance tab.

How does Costco pull it off? How can a discount retail chain pay middle-class wages and still bring in over $880 million in net revenues? And, a cynic may ask, with Wal-Mart wages becoming the norm, why does it bother?

- The Costco Challenge: An Alternative to Wal-Martization?

Interesting read and well worth the time. I personally only shop at Wally-World when I know that I cannot get the item elsewhere, or when the price delta is large. We normally shop at Costco, so it’s nice to see that they try and treat their employees so well. It really shows, the checkers at Costco seem to be somewhat happy to be there. Wally-world ones usually exude tiredness.

15 thoughts on “Costco Trumps Walmart!”

  1. It really is Wal-Mart on a whole that I object to; their pay, their business practices, etc.

    Several years ago, our local Wal-Mart wanted a zoning exemption to modify their existing S. Brooks store into a Super Wal-Mart. It was rejected. They tried again in 2002; rejected again. They got permission to build a brand new store, a Super Wal-Mart, on N. Reserve, in a spot that has created more traffic havoc than you could possibly imagine. They were permitted to do so because their applications for the S. Brooks store were turned down; the whole reason they were allowed to build the Super Wal-Mart in such a crappy (for traffic flow) spot was to "compensate" them for the zoning rejections.

    Well, guess who’s filing a third application, next week most likely, to re-zone the S. Brooks location for a Super Wal-Mart.

    Bleh.

  2. Greed breeds greed. If you as a leader, take home so much money – but try and sqeeze every last nickel out of your workers and suppliers, that is what I mean by corprate culture.

    We are (and should be) a free socity – and companies should be allowed to do business as they see fit. However, I have a feeling that Wally World is going to see a backlash from their practices, as Microsoft is going through right now.

  3. They are not unrelated. Together, they form part of the corprate culture. If you look at your measly pay check and know the execs are taking home millions, you will be less happy then if you look at your measly check and realise that the execs are also tightening their belts or what have you.

    Over compensated execs engender an Us vs Them managment style. Execs that are compensated in the same realm as their workers engender a team enviroment.

    Beyond the culture, there is no linkage between what any two people make at a company. This is one of the reasons that it is usally an offence to discuss your wage in the private sector. In the public sector, everyone’s wages are posted – you know what every one else makes.

    It’s all about Happy Workers, and promoting a culture where workers are productive, effective and motivated. Wallmart seems to not really motivate workers to do their best, rather they do what it takes to get buy.

    Prices and shopping experince being equal, most people would rather shop somewhere with happy workers then some place with unhappy workers.

  4. My point is that the two issues, CEO pay and average employee pay are not connected.

    It is certainly possible that Scott deserves every penny he makes AND Walmart employees should be paid more. If employee disatisfaction is costing the company more than giving them a raise which would reduce that disatisfaction then yes, Walmart should pay more.

    Personnaly, I don’t like shopping at either Walmart or Costco. Wallmart simply tends to have too many screaming kids and crowds of shoppers while Costco’s ambiance certainly leaves something to be desired (not to mention the usual long lines for checkout)

  5. How invested in a companies success can an average worker really be, when they see the top 1% of that company making hundreds of times what they make?

    Not only that, but couple that with getting paid a wage that is barely a survival wage.

    Here is the rub for me – People have a right to decide for themselves how to pay in their companies. However, the point of this is that a more humane approach to salary structure can work, and effecently. Costco is doing a bang up job – and turning quite a profit. Yes, if they cut wages they could turn a higher profit – but at what long term expense?

    I wonder how much Wally World spends on PR and Spin Control about exactly these issues. If the CEO would forgoe his yearly bonus – and started to pay their employees a few dollars an hour more, how much would they save in the long run not having to fight this battle? Heck – if all of the ‘C’ level executives would cut their salary in half – they could probally afford to give their employees a large increase.

    But – they have the freedom to run their company however they see fit. And I have the freedom to bitch about it, and choose to not shop there.

  6. I have never seen the relevance of comparing a CEOs salary to an average workers salary.

    Walmart is a much bigger company than Costco, hence I would expect that the leader of that company to make more money.

    Lee Scott may well be overpaid. But you can’t tell that at all from how much he makes compared to how much an average Wallmart employee makes. The proper question to ask is, does Wallmart as a company gain from the relationship. If Wallmart get more out of Scott than they give him (and if they couldn’t get the same performance by someone else for cheaper) than he is being appropriately compensated.

  7. In re shopping at Wally World vs Costco. Wally world makes their employees wear collared shirts. A Wally World special cost about 7 – 8 bucks. They AVERAGE $9 an hour – most make less. You do the math.

  8. Sinegal makes 8.5 time the salary of the average worker, and Scott makes 56 times the salary of his average employee – $1.2 million in salary alone. If he were to cap his salary at Sinegal’s 8.5 either he would need to take a pay cut to $178,500 or increase his employees salarys to $141,000 a year. Thats about $54 an hour – more then you and I make. If we were to include his total income from bonus etc he would be taking home well over $10 million a year. – over 500 times the salary of his average employee.

    That’s just sick.

  9. Tsyko, from another point of view the difference in CEO salaries isn’t as much as it appears. Lee Scott makes about .05% of Wallmart’s net profits, Jim Sinegal makes .04% of Costco’s profits.

    Another way of looking at things of course would be if it is easier for a Walmart employee to afford shopping at Walmart on their salary than it is for a Costco employee to shop at Costco. Costco is signifigantly more expensive than Walmart.

    Becca:

    I didn’t see anything in the article you linked to that compares pay at the Missoula Costco to pay at the Missoula Walmart.

    Regardless of what a ‘living wage’ may be, It is patently obvious that it costs more to live in Naples, California than it does to live in Naples, Georgia.

  10. I respect how the CEO of Costco only makes 10 times the amount of a checker. That is a good idea in my mind. Now, that’s salary – it probally does not include bonuses, stock, and perks. But what the hay, right?

  11. The <a href="http://www.everyweek.com/Archives/News.asp?no=4608&quot; rel="nofollow">Independent</a> did an article on this awhile back.

    I don’t think it’s as much apples and oranges as you might think. Comparing the pay alone for the Missoula Wal-Mart versus the Missoula Costco supports the above articles. On top of that, wages aren’t the only thing to be compared here; Costco simply treats their workers better.

    If the "cost of living" were remotely accurate half the time, I could see more problems with the standing comparison methods. But until a "living wage" actually IS a living wage, I don’t know that a 100% accurate comparison is possible.

    Which reminds me, I need to go get a Costco card.

  12. Comparing these two businesses seems to be apples and oranges to me.

    Especially the average pay comparison. Costo pretty much has it’s presence in large towns and big cities, while Wal-Mart has a large pressence is small towns. I expect that the ‘average cost of living’ for employees of the two chains is different as well.

    It would seem more interesting, and more useful, to have a comparison between Wal-mart employees in Spokane (for example) and Costco emloyees in Spokane. I expect, although I don’t know for sure, that the numbers would be signifigantly closer.

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