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JIM SINEGAL, the chief executive of Costco Wholesale, the nation's fifth-largest retailer, had all the enthusiasm of an 8-year-old in a candy store as he tore open the container of one of his favorite new products: granola snack mix. "You got to try this; it's delicious," he said. "And just $9.99 for 38 ounces."

Some 60 feet away, inside Costco's cavernous warehouse store here in the company's hometown, Mr. Sinegal became positively exuberant about the 87-inch-long Natuzzi brown leather sofas. "This is just $799.99," he said. "It's terrific quality. Most other places you'd have to pay $1,500, even $2,000."

But the pièce de résistance, the item he most wanted to crow about, was Costco's private-label pinpoint cotton dress shirts. "Look, these are just $12.99," he said, while lifting a crisp blue button-down. "At Nordstrom or Macy's, this is a $45, $50 shirt."

Combining high quality with stunningly low prices, the shirts appeal to upscale customers - and epitomize why some retail analysts say Mr. Sinegal just might be America's shrewdest merchant since Sam Walton.

But not everyone is happy with Costco's business strategy. Some Wall Street analysts assert that Mr. Sinegal is overly generous not only to Costco's customers but to its workers as well.

Costco's average pay, for example, is $17 an hour, 42 percent higher than its fiercest rival, Sam's Club. And Costco's health plan makes those at many other retailers look Scroogish. One analyst, Bill Dreher of Deutsche Bank, complained last year that at Costco "it's better to be an employee or a customer than a shareholder."

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[ 17 July 2005: Message edited by: robbie_dee ]

On another similar note, I am reminded of the philosophy that recently made the Rosenbluth travel agency number one in sales, namely "The customer comes second" (with the staff coming first).

A book on that story can be found here:

It's nice to know that treating people right does seem to have real payback in financial terms.

[ 18 July 2005: Message edited by: Mr. Anonymous ]

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Costco's average pay, for example, is $17 an hour, 42 percent higher than its fiercest rival, Sam's Club.

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Originally posted by Hephaestion:
Didn't I see a "60 Minutes" piece awhile back about ties between Costco and Chinese criminal gangs? Does anyone else remember that?

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Well paid workers suffer from environemtal diseases as much as poorly paid workers.

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Don't know but it does show that you can have a profitable business without impoverishing workers.

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[ 18 July 2005: Message edited by: abnormal ]

Also, the "average" cited for Walmart was solely for its Sam's Club warehouse stores. Warehouse jobs are often higher paid because they may involve more skills, such as operating forklifts, etc. Of course, Costco is also a warehouse-style retailer, so this could reveal a way in which their model for success is limited. In any case, even a wage of $12 an hour may be considered a borderline poverty level wage in many U.S. cities if the job does not include good health care coverage, because much of that wage can get quickly gobbled up by medical expenses. The article linked above is from the New York Times and presumably uses U.S. figures. The article also cites Costco as offering a significantly better health care package than Walmart.

Finally, I think you may be missing the point of the article. The point as I see it is that Costco is a business that has succeeded while paying its employees significantly more than the competition. I think that's a good thing and I would like to see more of it. Would you rather work for $12 per hour or $17 per hour? Which do you think would be easier to support a family on? I know which one I would choose.

[ 18 July 2005: Message edited by: robbie_dee ]

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"Average" wage figures can be misleading since they may lump together highly paid managers with lowly paid workers.

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Sam’s Club’s salaries may be higher than Walmart’s as a whole but I doubt it’s because of a preponderance of fork lift drivers.

There are plenty of unionized shops out there – Target for example. To the extent their merchandise overlaps their prices are within a few percent of Walmart’s on something north of 95% of items. Of course that means that they can’t be paying their suppliers any more than Walmart, especially since they’re unionized (so you’d expect wages to be higher). [As an aside, the median income of a Walmart shopper is south of $20,000 per annum, that of a Target shopper, north of $60,000.]

By the way, I’m not missing the point of the article. Costco has succeeded by paying significantly more than the competition. However, my point is simply that the competition doesn’t sound like it’s so bad. While I’d be the first to admit that I’d rather work for $17.00 an hour rather than $12.00 [we’re paying our summer students $15.00 an hour this year so I hardly regard $17.00 as princely] relative to other employers this ain’t bad (and I’m sure that those employers that are paying less don’t provide medical either).

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By the way, my comment re Walmart’s employees rating it as one of the best employers in Canada – not a joke. That’s been the case for several years now.

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I guess that depends on who is doing the ratings and what the criteria are.

Most of these kinds of surveys are done by consultants.

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Most of these kinds of surveys are done by consultants.

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I'd suspect all of them are. I wouldn't give any credibility to any survey that wasn't. How many employees will say negative things about their employer if they think there is anyway that they can be identified.

Besides, unless you have an entity that is surveying a large number of firms there is no way to compare responses - the surveys and methodology have to be the same at each company.

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There are plenty of unionized shops out there – Target for example. To the extent their merchandise overlaps their prices are within a few percent of Walmart’s on something north of 95% of items.

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Target is 100% non union. A group of employees in Minnesota are trying to change that. They have a website, but as of yet there is not a single Target store under contract in the USA. Same with Whole Foods.

[ 19 July 2005: Message edited by: robbie_dee ]

plus, i'd like to see the methodology behind that survey anyway.

plus, wal-mart still union-busts, still discriminates against women, still forces workers to donate unpaid overtime, still rips them off with health-coverage, still gets a lot of its merchandise from sweat-shops, still creates big-box sprawl development.

somehow or other, the fact that low-income people shop there, doesn't make it sacrosanct to me.

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Quite true, but the same thing holds true for Costco or store for that matter. Why do you think that Costco’s average salary is any more meaningful than Walmart’s?

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Originally posted by robbie_dee:
"Average" wage figures can be misleading since they may lump together highly paid managers with lowly paid workers. A better statistic would be the median wage, which unfortunately I don't think is avalable.

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i'd like to see the methodology behind that survey anyway.

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You can find Hewitt's website here.

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Originally posted by Blind_Patriot:
I know some Costco employees. Starting salary for a cashier is a little more than $40K CDN. Why do you think they are so pleasant all the time.

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Here is a company that is proving that these things are indeed possible. That’s the message. In a nation where business conservatives, overpaid CEO’s, and Wall Street analysts will tell you that competition in a demanding, global economy means near enslavement of the hourly worker, Costco has proven them to a great degree, wrong. If you read the NYT article, that’s the message you should get, and that’s what message that moderates, progressives, and liberals should be talking about.

Many postings on this topic and countless others (in the progressive sphere) focus on micro issues, personal agendas, and selfish priorities. Look at the rants on this topic alone. There is discussion about whether the near doubling of typical Walmart wages is enough, whether the statistical analysis is accurate (or meaningful if it is), that none of this matters because Costco is a big box retailer contributing to the decline of decent American life and putting more farmers out of business, etc.

Sure, and I bet somehow they’re destroying wetlands, killing spotted owls, and have 5 year old illegal aliens in the back room making tennis shoes for ten cents an hour.

C’mon. Really. This is a success story. A plus for the average unskilled American worker, that is also a plus for the typical consumer. Is it perfect? Of course not. Is it the solution to all of our problems and a business model for everyone else? No of course not, but it’s a start. Most importantly, it’s a perfect counter to the Walmart argument that Walmart IS the model, and how it has to be.

There are some posts about CEO salary, big box retailers, unions and the Walmart/Costco workers. READ THE ARTICLE. It’s impressive, or should be to progressives in many ways. There are all of the issues mentioned in previous postings, and more.

As for unions:

From the NYT:
{Costco also has not shut out unions, as some of its rivals have. The Teamsters union, for example, represents 14,000 of Costco's 113,000 employees. "They gave us the best agreement of any retailer in the country," said Rome Aloise, the union's chief negotiator with Costco. The contract guarantees employees at least 25 hours of work a week, he said, and requires that at least half of a store's workers be full time.}

As for CEO’s salary:
(again from the NYT)
{Despite Costco's impressive record, Mr. Sinegal's salary is just $350,000, although he also received a $200,000 bonus last year. That puts him at less than 10 percent of many other chief executives, though Costco ranks 29th in revenue among all American companies.
"I've been very well rewarded," said Mr. Sinegal, who is worth more than $150 million thanks to his Costco stock holdings. "I just think that if you're going to try to run an organization that's very cost-conscious, then you can't have those disparities. Having an individual who is making 100 or 200 or 300 times more than the average person working on the floor is wrong." }

Celebrate people. Tell THIS story to your friends. When you must patronize a discounter, choose this one with, if not with a sense of pride, then at least with less of a sense of guilt.

See, by the loud wails of those of us in the center or to the left of center, we constantly enable the far right to convince the rest of America of their superior ability to govern, to manage business in our country, and to lead us wherever they should want to take us. We enable them by splintering our discourse and ultimately fracturing our own base. They will convey a united front on the big picture, and hash out the details in committee. We see a story like this and immediately want to discredit the details because after all, it’s big business, something we’re suspicious of, maybe one or two of us has had a bad experience, maybe they sell a product that is of dubious origin, maybe one of their executives comes from a suspicious background. We look silly, disorganized, weak, and confused. (Does anyone remember the last election?)Yes, there will have to be compromise; no, not everyone will be happy. But can't we stop throwing the baby out with the bathwater?

Sorry for the extra long babbling rant. But we’re never going to get anywhere by self righteous whining about every detail in the big picture. I’m sure there’s someone out there that doesn’t use any type of petro-chemical product in their life, that has never bought anything manufactured overseas by a minimally waged worker, that only buys organic foods produced on family farms, that refuses to shop anywhere but a family owned store, and lives in a home made from naturally occurring, surplus material. I just don’t know such a person. So what to do?

Learn to strike a balance. Go for a net gain, and not the status quo (or two steps back.) Speak with a solid, voice. Be supportive of those that are willing to go out on a limb to try to make it better. Keep your message focused, and even though you consider excessive CEO pay to be your pet peeve, remember how it fits in with the grand scheme. Is youre cause CEO pay? Yes, Mr. Sinegal does nicely, and with his stock he is a millionare. But in the bottom 10% of CEO compensation? That says something. Are low wages for the American worker your battle? Sure, 10 – 18 bucks an hour isn’t dream we want for our kids, but it’s nearly double what was becoming the accepted norm. That’s a breakthrough.

Dissent? You bet. Go ahead. Looking for errors, both in raw facts and in critical analysis? Sure, go ahead. But please be sure and realize that how you voice your analysis will strengthen or weaken the overall position. By screaming in a shrill voice about how a little progress just doesn’t get us where you need us to be, you’re giving away the store. Literally.