emulate this man

I'd confirm the numbers on the top level post with the personal impression that the Costco employees at my local outlet seem to be attracted to that outlet on a long term basis, as most have been there in excess of 3 years. The only reason why they seem brusque at times is that the store carefully seems to man the operation so there are never any people without something to do. When they need cashiers, the back office empties out and helps box groceries.

I disagree with assuming that Costco and Sam's Club can be a 'one-to-one' comparison.

Based off of my experience with Sam's and Costco in Arizona and in Minnesota, comparing Costco and Sam's Club is the equivalent of comparing Target and Wal-mart.

Costco has sold itself to the ‘upper level’ of society, versus Wal-mart, which continues to go for the ‘lower’ end. It’s the same debate that people have between Target and Wal-mart… Each store has through its marketing, convinced the public (which I agree, I’ve been convinced of as well), that it is the best place for ‘you’, the consumer.

Since their clientele is different, this leads to a variance in the products that each store carries, and the margin that they can earn.

Typically, Costco carries higher priced / higher “quality” items (actuality or perception can be argued), versus Sam's which is pushing more for lower quality, lower priced items. So Sam’s has to move a lot more merchandise to make a profit. (Which, Sam’s and Wal-mart usually does, http://finance.yahoo.com/q/co?s=WMT)

Sam’s Club is continuing that same strategy that allowed Wal-Mart to do so well – entering towns / cities that others had perceived as a ‘higher risk’ or were underserved by the local businesses.

As I run the numbers Costco is paying about 40% more per employee and getting about 24% more profit per employee. While I might prefer to work at Costco, I might prefer to own Wal-mart stock based on those two statistics in isolation.

One other factor I would add to Dave's is that many Wal-marts are in more rural locations that tend to have lower wage rates than Costcos which, I believe, tend to be in metropolitan areas.

I patronize both stores and can't say I've seen a noticable difference in the employees. But the lines are longer at Costco. That's how I pay for their employee efficiency and why I shop there less often. But that is part of their model.

This sort of comparison doesn't hold up to scrutiny, at least not on the information you provided, alone.

The companies a) target different markets, b) with different products and c) different business plans and d) are of vastly different sizes as corporations.

I'd have to pull up their full financial reports and spend an hour or two on all the numbers and footnotes before I decided which stock I'd want to own (if either).

But in particular, the comparison of employee stats is probably misleading on several grounds. First, WalMart has historically targetted lower income areas, including small rural towns, for its stores. That means, among other things, lower average wages for the region and lower costs of living.

They have also provided a LOT of part time jobs for retired people and parents who are supplementing the family income. At least some of those part timers have medical coverage elsewhere.

The higher proportion of employees who are earning supplemental vs. primary family income is also one reason for the higher turnover as is the proportion of elderly.

Finally, your info does not address stock and option plans, which in some cases have greatly added to the income / financial rewards that full time WalMart employees have enjoyed over the years. I'm not familiar enough with Costco to know their setup.

Now, having said that, I have no problem with the idea that paying higher wages can benefit a company. I built and ran very successful small company teams doing just that, while having to compete with large corporations. But it's not a panacea and in any case, the numbers you produce don't make the case you claim.

A.L., I'm with Dave, Richard and MBA on this one. I don't think the data in the figure warrant any particular conclusion about the relative morality of these corporations. Having multiple wage levels across different employment sources lets people find their level. I say that out of concern that people be taken seriously as intelligent adults, capable of making intelligent choices among options before them. If the people at Wal-Mart had better opportunities, they would take them. Indeed, some of them apparently do - Wal-Mart, according to the figure, has a higher turnover than Costco. But having a job for six or twelve months at Wal-Mart may create those better opportunities. The Wal-Mart job may let someone get experience to put on a resume, let them demonstrate they are reliable, they can get up in the morning and go to work, get along with other people, follow instructions, and so on. That can help them get a better job, or let them pay for some kind of education that can be had over the course of a year. If Costco has less turnover, that may mean that they are drawing from a different pool of applicants. But far from supposing that Wal-Mart employees would be better off at Costco, it's possible that Wal-Mart is exactly what they need at either the beginning or the end of their worklives.

Guys, I think you may be reading a bit too much into both the post and the table (I'd strongly suggest reading the articlem if you have access to BW online).

Wal-Mart (not Sam's Club, a division of Wal-Mart) is under attack for four reasons:

1) they are ungenerous in their employee policies;
2) they are ungenerous in their purchasing policies;
3) they compete with established local stores;
4) people just like picking on the big guys

There are a number of counterarguments to all of the above, but one theme that runs through them is 'the inevitibility of the market'; i.e. WMT has to do those things or it couldn't be viable.

The Costco example suggests that there are viable models that don't involve criticism #1.

That's my only point.

A.L.

MBAs tend to get that way. Never get caught between an MBA and an HP 12-C.

I could attack Wal*Mart for some additional reasons.

One of the more egregious business practices is the way WalMart opens a ring of stores, then once all of their competitors are driven out of business, shuts them all down and opens a giant super-duper WalMart in the middle. Suddenly everyone has to travel father to get to the store, and they only can shop at one store.

Not to mention impervious surfaces, massive alterations to drainage patterns, etc.

The examples themselves are secondary. The main point is very simple: Whether you're the CEO or the mailroom clerk, the cashier or the CFO, "Do The Right Thing" is the tried and true way to business success.

Ethics policies are no substitute for personal integrity from every employee, from the temporary hire to the executive with stock options up the the yin-yang.

Wal-Mart is simply on the leading edge of a very large price signal, and the ultimate end of this process isn't Wal-Mart's current $9 per hour with no benefits, but zero dollars per hour: ten years from now, no matter where you shop or whether the management is good or evil or indifferent, there will be no such thing as a human bagger or checkout clerk in any discount store.

Something else to consider next time you're shopping at Costco...

(I'm switching to Sam's Club!)

"Wal-Mart is simply on the leading edge of a very large price signal, and the ultimate end of this process isn't Wal-Mart's current $9 per hour with no benefits, but zero dollars per hour: ten years from now, no matter where you shop or whether the management is good or evil or indifferent, there will be no such thing as a human bagger or checkout clerk in any discount store."

I disagree. That will be just one end of a set of competing strategies, some of which are better suited to some companies than others. For example, I think the electronic baggers are a very bad fit for Wal-mart, a reasonable fit for Target, and an awesome fit for Home Depot. The more volume you do, and the more baggers you normally run, the less benifit you get out of electronic baggers and that will remain true for the foreseeable future. (I don't expect anything to pass the Turing test within the next 40 years.)

Besides, human service itself has marketing value.

Richard Heddleston's comment reminded me of a skit I did waayyy back when I was in b-school. Key part, sung to the folk song John Henry:

When John Henry was a little baby
Sittin' on his mammy's knee,
Well he picked up a pencil and an HP-17 an' he said
Finance gonna be the death of me, Lord Lord -
Finance gonna be the death of me.

I'll spare you the rest, about being forced to take "communications effectiveness" classes, etc., other than to say that the song was a particular hit among minority students.

- Robin, who occasionally confesses to having an MBA from one of those "top" schools, but makes up for it by having used those skills to help several small, minority-owned companies succeed.

AL makes a good point about the "inevitability of the market".

While it's true that unfettered markets can be ruthless about driving down costs and eliminating inefficient competitors, it's also true that people make purchasing decisions on a number of criteria.

Witness Starbucks.

Only a small number of people deliberately make purchases based directly on the hiring practices or material sources of the retailer. However, a lot of middle-upper to upper income people (top 40%, so a bracket that includes many readers here) do purchase based on perceived quality.

Companies that deliberately position themselves to reach that market will usually have higher wages, because they skim the higher end buyers and MUST provide those buyers with the sense of amenities associated with the purchase. That includes work force dress, manners and language as well as building fittings and brands offered.

Moreover, the very efficiency of the market leads to alternatives that provide more value for the buying public. For instance, Lowes just opened a store 1/2 mile from the Home Depot in my semi-rural, small-town area. We don't have anything like the shopping alternatives I've had when I lived in Silicon Valley, LA, Washington DC etc. unless I drive over an hour down towards NYC.

Both the Home Depot and the Lowes, in fact, are located inside the limits of a small city that was torn apart by race riots in the 60s and has never recovered ... horrible schools, real drug problems in the public housing neighborhoods, no jobs.

Two things strike me about the new Lowes. First, it drew its workforce mostly from people who were NOT already working for Home Depot or the Wal-Mart down the street. And second, it has far less of the 'building supplies' stock than Home Depot and more home decorations, appliances etc. On the other hand, it offers higher quality and higher priced home goods than the Wal-Mart. And just to emphasize, these 3 stores all are located along the same 1/2 mile of street.

I regularly see large families of blacks and hispanics drive or take the bus to the Wal-Mart to shop. Enough cashiers speak Spanish to be able to interact well with hispanic families. If Wal-Mart were not there, these families would be hard put to find a place anywhere nearby where they could afford clothing, dishes, sundries and eye exams. Moreover, Wal-Mart hires many of its workers from those communities - workers who, from my interaction with them - don't necessarily have the skills and work ethic to do well at Lowes. I talked with one Wal-Mart shift manager, a black woman who started as a stock clerk. She admitted they have a high turnover, especially among young employees, but note that the ones that stay migrate into good middle-class positions they would otherwise have a hard time finding. And the ones who leave at least have had the opportunity to earn some money and work experience.

"The Costco example suggests that there are viable models that don't involve criticism #1.

That's my only point."

But with respect, A.L., you haven't demonstrated that Wal-Mart is 'ungenerous' in their employee policies, only that they pay less. Look at two of the details in the chart you presented: While numbers of employees aren't given, Wal-Mart's labour and overhead costs are 17% of sales, Costco's 9.8%. This probably means that Wal-Mart requires more employees per store to do the same job. Why? Presumably because Costco employees have something Wal-Mart employees don't. That might be experience (maybe people get experience at Wal-Mart and then move on to Costco). It might be training - Costco might be more willing to spend money to train employees because their employees stay around longer, or because they've been through a filtering process at Wal-Mart or another such retailer, so there is less risk associated with the ones they hire.

Further, look at the two asterisks in the Costco column, in the "covered by retirement plans" row. 91% of Costco employees are covered, but the two asterisks tell us that this does not include employees on the job for less than 12 months. There's no similar qualification for Wal-Mart listed. Why not? Perhaps because, again, Costco wants to be more sure of their employees before investing in them. Wal-Mart is more willing to take a risk on employees. In fact, neither company is ungenerous, on the basis of these data. They're just hiring different people with differnt skills and different objectives. They pay them differently. That's a price signal. It makes things work.

As for your other points, I am pretty sure #4 is correct, I don't have any knowledge about #2, but I read a report last year that when Wal-Mart moves into an area all retail business picks up. That might be, at least in part, because they have to compete with Wal-Mart and that makes them better.

It's never endingly ironic that the same idealists who decry materialism decry people who seem to be trying to get along on less money.

WalMart seems to find legions of people who can or must get by on less pay. Some move out and up, some would rather be there than where they were before.

At least they are working. Contrast with welfare recipients who feel they are being held down by what they are paid to not work.

I think you meant to say "doing well by doing good" rather than "doing well by doing right."

An average wage of twice the minimum isn't doing wrong. Nor are increased wages, by themselves, a sign of sanctity. In some parts of the U.S., you can live pretty decently on Wal-Mart's average wage - and if you stay at Wal-Mart for a couple years, odds on you are earning that wage or higher, based on their turnover.

I would further suggest that the wages are reflective of market conditions. While it's nice to pay people lots of money, it isn't necessarily right or good or noble. Wages (and other prices in the marketplace) are generally a reflection of conditions in the market, which are in turn unconnected to the state of human morality and ethics. If something is highly desirable - for instance labor from very loyal, hard-working employees - then employers will pay a premium for it. If a system in another store is set up to deal with a lot of employee turnover, and requires only good effort from reasonably sentient, adequate employees, then the wages will reflect that. Throw the equity ownership idea into the mix, along with customers - and this adds two more sets of wants and needs. Equity owners, who want to maximize the value of their shares, force managers to make stores profitable. This means keeping wages up high enough to keep good employees, but low enough to keep profits up. The profits themselves are dependent on the customers, who will go someplace else if the service isn't good.

The state of perfect equilibrium between labor and employer wages, equity ownership interests and customer desires is rarely achieved; but over a large system like Wal-Mart, something like a representative sampling is achieved.

In other words, the wages and benefits at Wal-Mart and CostCo are where they are not because of social engineering, but because that's where the market set them. It ain't right, but it ain't wrong either.

I find a huge distinction between Wal-Mart and Costco.

Wal-Mart is filthy and badly maintained. Costco is spotless and well maintained. Ditto for Target.

It's a no-brainer for me.

MMurcek says:

"It's never endingly ironic that the same idealists who decry materialism decry people who seem to be trying to get along on less money.

WalMart seems to find legions of people who can or must get by on less pay. Some move out and up, some would rather be there than where they were before.

At least they are working. Contrast with welfare recipients who feel they are being held down by what they are paid to not work."

In the case of Wal-Mart employees, we taxpayers are the ones paying for the social services they can't afford. Don't kid yourself - the savings you think you're getting on your cheapo Chinese-made Wal-goodies...you're actually paying plenty for them in the long run.

If you're gonna worry about the expense of social services foisted upon the taxpayers, don't fret about the impact of a Wal Mart. Fret about all the dirt-poor people from impoverished nations like Mexico streaming into places such as california. Those folk are straining the system a lot more than blue-collar wage workers employed at Wal Mart are.

"In the case of Wal-Mart employees, we taxpayers are the ones paying for the social services they can't afford. "

Did Wal-Mart have anything to do with causing our elected government to offer those services in the first place? Does Wal-Mart have any say in it?

Wal-Mart is not responsible for our fearless leaders choosing to offer social services to people that work for Wal-Mart. Wal-Mart is not responsible for its employees choosing to accept those social services. Wal-Mart isn't even responsible for its employees being eligible for those services, since the eligibility requirements are the arbitrary choice of elected officials who do not work for Wal-Mart.

If you don't like paying for the social services consumed by Wal-Mart employees, then lobby your elected officials to stop offering them. Blaming Wal-Mart for the situation is ludicrous.