Why Can’t Walmart Be More Like Costco?
One simply cannot have a discussion about Walmart's wages without someone bringing up Costco. It seems to be de rigeur, like tipping your waiter, calling your mother on her birthday, and never starting your thank you notes with the words "Thank you". So lets get it out of the way before the supper gong goes.
Obviously, there's a pretty pleasing narrative for labor activists:
A Sam's Club employee starts at $10 and makes $12.50 after four and a half years. A new Costco employee, at $11 an hour, doesn't start out much better, but after four and a half years she makes $19.50 an hour. In addition to this, she receives something called an "extra check"—a bonus of more than $2,000 every six months. A cashier at Costco, after five years, makes about $40,000 a year. Health benefits are among the best in the industry, with workers paying only about 12 percent of their premiums out-of-pocket while Wal-Mart workers pay more than 40 percent.
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What do you notice? Costco has a more highly paid labor force--but that labor force also brings in a lot more money. Costco's labor force, paid $19 an hour, brings in three times as much revenue as a Walmart workforce paid somewhere between 50-60% of that. (There's a bit of messiness to all these calculations, because of course both firms have employees who don't work in stores--but that's the majority of their workforce, so I'm going to assume that the differences come out in the wash.)
This is not because Costco treats its workers better, and therefore gets fantastic productivity out of them, though this is what you would think if you listened to very sincere union activists on NPR. Rather, it's because their business model is inherently higher-productivity. A typical Costco store has around 4,000 SKUs, most of which are stacked on pallets so that you can be your own stockboy. A Walmart has 140,000 SKUs, which have to be tediously sorted, replaced on shelves, reordered, delivered, and so forth. People tend to radically underestimate the costs imposed by complexity, because the management problems do not simply add up; they multiply.
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http://www.thedailybeast.com/articles/2012/11/26/why-can-t-walmart-be-more-like-costco.html
Couple of key points:
A Costco employee produces three times the amount of revenue of a Walmart/Sam's Club employee.
The average Costco customer earns $85,000 per year and spends an average of $100 per visit.
Costco makes more income from membership fees than they do from net profit.
For the record I support a very large increase to the national minimum wage, something in the neighborhood of 12-14 dollars per hour depending on the area.
Little more sales data about Costco:
http://02ea98a.netsolhost.com/pdf/Business%20Center%20Fact%20Sheet.pdf
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As Colbert would say, the free market has spoken.
