The Trader Joe's Lesson: How to Pay a Living Wage and Still Make Money in Retail

[xchrom]

http://www.theatlantic.com/business/archive/2013/03/the-trader-joes-lesson-how-to-pay-a-living-wage-and-still-make-money-in-retail/274322/



The average American cashier makes $20,230 a year, a salary that in a single-earner household would leave a family of four living under the poverty line. But if he works the cash registers at QuikTrip, it's an entirely different story. The convenience-store and gas-station chain offers entry-level employees an annual salary of around $40,000, plus benefits. Those high wages didn't stop QuikTrip from prospering in a hostile economic climate. While other low-cost retailers spent the recession laying off staff and shuttering stores, QuikTrip expanded to its current 645 locations across 11 states.

Many employers believe that one of the best ways to raise their profit margin is to cut labor costs. But companies like QuikTrip, the grocery-store chain Trader Joe's, and Costco Wholesale are proving that the decision to offer low wages is a choice, not an economic necessity. All three are low-cost retailers, a sector that is traditionally known for relying on part-time, low-paid employees. Yet these companies have all found that the act of valuing workers can pay off in the form of increased sales and productivity.

"Retailers start with this philosophy of seeing employees as a cost to be minimized," says Zeynep Ton of MIT's Sloan School of Management. That can lead businesses into a vicious cycle. Underinvestment in workers can result in operational problems in stores, which decrease sales. And low sales often lead companies to slash labor costs even further. Middle-income jobs have declined recently as a share of total employment, as many employers have turned full-time jobs into part-time positions with no benefits and unpredictable schedules.

QuikTrip, Trader Joe's, and Costco operate on a different model, Ton says. "They start with the mentality of seeing employees as assets to be maximized," she says. As a result, their stores boast better operational efficiency and customer service, and those result in better sales. QuikTrip sales per labor hour are two-thirds higher than the average convenience-store chain, Ton found, and sales per square foot are over 50 percent higher.

[Ruby the Liberal]

1. Excellent piece!!

Here is an article on Costco - same theme:

http://www.politicususa.com/costco-proves-republicans-wrong-paying-living-wage-watching-profits-soar.html

[xchrom]

3. +1

[leftyohiolib]

2. cutting labor to raise profit is lazy ceo thinking and the sign of poor management.

[Sherman A1]

4. Agreed

[LiberalEsto]

5. This is a striking example of good long-range thinking

and I'm extremely happy that it's working successfully.

One of the biggest problems with the vast majority of businesses is their seeming inability to focus on anything but the current fiscal quarter's bottom line.

There's constant pressure by executives onto managers, and managers onto workers, to meet this deadline, meet this quota, meet this target without regard to quality or the future of the company.

In the IT business, with which I'm most familiar because my husband is an IT professional, workers constantly struggle to meet unreasonable, unrealistic deadlines by working many unpaid hours at night or on weekends, just to keep their jobs. This impacts their health and their performance, and can lead to serious errors that can result in disruptions for clients. The only reason there isn't as much employee turnover as one would expect, given these working conditions, is because jobs everywhere are scarce, and the competition from foreigners with H1B visas is high. I'm sure similar situations exist in many workplaces and industries where union protection is weak or nonexistent. The workers are simply regarded as expendable.

Another example of limited-vision focus is the inability of businesses to deal with the byproducts of their work. Even with our limited environmental regulations, some companies still dump untreated wastes without regard to the possible consequences to others. The fracking industry is one of the most severe examples, but one can also point to nuclear power generation and the resulting inability to cope with mounting piles of spent nuclear fuel. Paper mills dump huge amounts of nasty wastes, including dioxins, into waterways. But only the bottom line counts for the people in charge of these companies. And only our feeble OSHA regulations and minimal enforcement exist to protect workers in many of these and other industries, such as mining.

I wish more businesses operated using long-range models and an understanding that decently paid workers are better for overall success.

[bemildred]

6. Employers that screw their employees will screw you too. nt

[wakemewhenitsover]

7. Ty for posting the latest in a long chain of terrific articles that you bring to our attention!

[xchrom]

8. ...

[liberalmuse]

9. I go to Trader Joe's a lot...

and talk to the employees and they are always telling me how they love their job, and it shows! Great store.

[srican69]

10. A T-joe opened right at my door step. I can walk to it and pick up my Mushroom Truffle flatbread

I have always shopped there .. but when i heard that there opening a new place next to my house - I felt that I had hit a jackpot.

[franco1989]

11. Selling a myth

This post is amusing in light of the fact that over the last couple of years Trader Joe's has been overhauling its employee classification and pay raise system in ways designed to keep new employee salaries low for as long as possible and to slow the growth of current employees' wages. At the same time its vaunted benefits package has been converted to a three-tier setup aimed at reducing benefits to younger and/or newer employees. It's a far cry from the generous benefits the company supported for the last couple of decades--the package that still appears in articles like the one above, the Trader Joe's Wikipedia entry, and the glowing online employer reviews.

The timing of this article is particularly interesting considering the patronizing letter that went out to TJ employees a couple of days ago announcing big cutbacks in the company's "not sustainable" retirement / bonus program and promising cuts as well in their mediocre health coverage--as soon as the corporation figures out the impact of "Obamacare" (their word) on their bottom line.

Trader Joe's has been phenomenally successful in selling the myth that their enormous corporation (owned by the even more enormous Albrecht family trust) is still the funky, employee-friendly little niche store that Joe Coulombe created thirty-odd years ago. It may be small compared to Safeway and its ilk, but Trader Joe's is another big, expansion-obsessed retail chain which buys into all the business-school nostrums for increasing profit margins and pushing down wages and benefits. If their workers are today in a somewhat better-than-average position in comparison to other grocery store employees, it's mostly because they were on a higher limb before the axes started to swing. The slide down to everybody-else-land will take them a little longer.

[hrmjustin]

12. Welcome to DU my friend!