The anti-Wal Mart

[Darth Wong]

One potential benefit of paying line workers more is that they will be happier, and will treat customers better. Of course, this is theoretical.

[Howedar]

I'd say it's somewhat more than theoretical. It's not proven to happen every time, and I don't know of any studies on the matter, but I certainly receive better service at stores with happy employees.

[The Kernel]

So if they're not paid what the market dictates, then how should we determine salary? Dice maybe? If you want a good paycheck with good benefits then you make yourself competitive so it's in the best interest of your employer to keep you.

That's up to the individual employer. But it's moronic of you to claim that it's irresponsible for a company to pay their employees better than the market minimum.

And that goes a long way, but in the extreme if it causes a company to go out of business, and everyone loses their jobs, their investments, their retirements, etc, then everyone's fucked. Just look what happened to all the manufacturing jobs in this country.

Fortunately, I doubt very much you will see an export of retail sales anytime soon.

Then once again you can go invest in them. That would be a lot more productive than whining about others not wanting to. It is in fact their money, then can do with it as they please.

I HAVE invested in them, they are part of my stock portfolio. And where did I tell you that you should invest with them as well?

[Stormbringer]

Quality might not matter if all you *ever* want that employee to be is a cashier, but if you want them to move into management the initial investment could pay off.

True, but even then it strikes me as being a waste of money since even with the low turnover rate only a small fraction of your employees will be promoted to management.

If the company is relatively stangnant yes. If it's growing at a pace to allow a reasonable degree of expansion then it's not such a bad thing. One doesn't have to be promoted to management to move up the food chain.

[Big Phil]

I know Jim Sinegal personally - he and Costco are 20 year clients of my company. We conduct all of their market research, and have done so since before there was even a Costco.

Treating one's employees right may not make Wall Street happy, because like the article said, it takes money out of the pockets of investors, but it does provide long-term, sustainable growth and increase employee retention.

Costco has somewhere in excess of 98% employee retention, a customer retention rate of over 85%, and a customer satisfaction rating approaching 90%. Compare this with Wal-Mart, which has an employee turnover of about 90%, or Sam's Club, with a customer retention rate of 50% and customer satisfaction of about 55%.

Costco also does business in what I consider to be the right way. They don't beat up their suppliers to lower costs, and they don't try to suck every last penny out of their customers.

The "Market," is Costco customers, not Wall Street. Costco customers typically have six figure incomes, shop there every other week, and spend several hundred dollars per trip. These are the people you want to keep happy, not Wall Street.

[Lagmonster]

We have two Costco stores here in Ottawa. No argument when I'm shopping there, except for one: Althought their per unit price is amazing, you have to buy in bulk up here, and thus there's no way you can spend 'a little money' when you shop there.

That said, I imagine they're run differently in the US than up here, where they're little more than warehouses with cargo slats full of goods.

[Stormbringer]

We have two Costco stores here in Ottawa. No argument when I'm shopping there, except for one: Althought their per unit price is amazing, you have to buy in bulk up here, and thus there's no way you can spend 'a little money' when you shop there.

That said, I imagine they're run differently in the US than up here, where they're little more than warehouses with cargo slats full of goods.

Not too much different down here, they're a bulk retailer for the most part.


Either way, on discovering they have one near me I'm definitely going to have to check it out. If I can save moolah on things by getting bulk that's all the better, I hate regular shopping trips anyway. And cheap always appeals to my college budget.

[aerius]

Low turnover is usually only a good business goal if there is a lot of training required for staff. I'm sure that jobs at the Deli, butcher, etc. at Costco actually have considerable training time, but that doesn't mean you want to pay the guy working the register 30% more than he would get if he took a job somewhere else.

It's not just the training that counts, it's also how well the employees work together as a team. When a group of people work together for a while, they tend to gel and pick up parts of each other's jobs so that in the end they work together more smoothly and efficiency goes up.

For instance, when I started working at a bike shop all but one of the mechanics were new guys, but all of us were already well-trained and had previous experience at other stores. The 1st year was pretty rough, there were fuckups and we'd sometimes get in each other's way and miss things. By the 3rd year we were a smoothly functioning team, we could do each other's jobs and cover for each other when the store got super busy. Screwups were almost unheard of and efficiency had gone up a lot.

When you have frequent turnover, the employees never settle in and gel, efficiency is crap and employees don't care about their jobs & tend to have poor work ethic. In the long run, this leads to a bunch of stupid-ass rules & regulations for the employees and you literally have to spell out their jobs for them, they don't know how to be flexible and take the initiative and every little problem becomes "talk to the manager". Not a good environment for staff or customers.

[SirNitram]

Costco has somewhere in excess of 98% employee retention, a customer retention rate of over 85%, and a customer satisfaction rating approaching 90%.

Sounds like a solid way to build up for long term growth to me, though I'm no business major(Give me a textbook and the final exams for their courses and I could be, ho ho ho! It's the flu meds, folks, please ignore the crappy humour).

I'm not surprised this butts-heads with the Street's folks. These are the folks who think the Internet Bubble had anything to do with reality, and continue to make their money off fairy gold. Until the investors show interest in promoting long-term growth instead of the short term profits, the American economy can expect more Wal-Mart's.. But Costco is a good indicator that the trend will end.

[Master of Ossus]

It's not just the training that counts, it's also how well the employees work together as a team. When a group of people work together for a while, they tend to gel and pick up parts of each other's jobs so that in the end they work together more smoothly and efficiency goes up.

Right, that's part of the turnover cost. In most management positions it takes between one and five months for a new hire to become even remotely productive, and a full year for them to reach productivity comparable to that of other people. Since such costs usually don't apply to entry-level hires (who take between two and six weeks, on average, to become productive), it's usually a much better idea to retain managers as opposed to retailers.

When you have frequent turnover, the employees never settle in and gel, efficiency is crap and employees don't care about their jobs & tend to have poor work ethic. In the long run, this leads to a bunch of stupid-ass rules & regulations for the employees and you literally have to spell out their jobs for them, they don't know how to be flexible and take the initiative and every little problem becomes "talk to the manager". Not a good environment for staff or customers.

Perhaps not, but it's quite possible to create effective employees in such a system, and unskilled positions do not have the same kind of turnover costs that skilled ones have.

[Stark]

Doesn't 'flat earnings' just mean the shares paid the same they did last year? Ooooh, sounds like slow death to me I want to invest in something that'll pay regular for decades; I'll buy all their stock.

But... is that $16 an hour US dollars? Thats ludicrious. Thats like (counts on fingers) $22-23 Australian. Wow. Damn my high-stress career, I wanna work at Costco.

[Master of Ossus]

Doesn't 'flat earnings' just mean the shares paid the same they did last year? Ooooh, sounds like slow death to me I want to invest in something that'll pay regular for decades; I'll buy all their stock.

Flat earnings is bad because it prevents you from expanding, which in the retail industry is a big problem.

[Jalinth]

Right, that's part of the turnover cost. In most management positions it takes between one and five months for a new hire to become even remotely productive, and a full year for them to reach productivity comparable to that of other people. Since such costs usually don't apply to entry-level hires (who take between two and six weeks, on average, to become productive), it's usually a much better idea to retain managers as opposed to retailers.

snip

Perhaps not, but it's quite possible to create effective employees in such a system, and unskilled positions do not have the same kind of turnover costs that skilled ones have.

Really depends on the place whether turnover costs matter. Even unskilled positions can have duties that lead to turnover costs. I know of one very successful small supermarket chain (former home) that gave "stockboys" the responsibility for one or two isles - they organized it as they saw fit (subject to certain marketing agreements), they could use a small part of the shelf space for "experimental" items - things people asked about but couldn't get, etc... They were asked to think about what their customers - at that store - wanted and generally rewarded the company by making smart decisions. These employees were well paid (essentially union level wages - $18+ hour without a union) and were very loyal. So even these "unskilled" positions were given more power and responsibility.

As a question for anyone who has worked at Costco, do they filter down management type decisions to lower levels (do the people at the bottom have any "manager" type authority or discretion - can they suggest certain items are being requested, etc...? ). If they don't, then the wage question is legitimate

[Big Phil]

As a question for anyone who has worked at Costco, do they filter down management type decisions to lower levels (do the people at the bottom have any "manager" type authority or discretion - can they suggest certain items are being requested, etc...? ). If they don't, then the wage question is legitimate

Costco saves money by centralizing and streamlining product purchase decisions. They also carries something like 4,000 SKU's (unique products) rather than the 100,000+ that most grocery stores carry, or 200,000+ carried by Wal-Mart. Having fewer SKU's allows for greater purchasing efficiency.

As far as the floor employees suggesting things - they can certainly do so, but the bottom line is what the customers want. Costco will not purchase an item for only one or two customers.

[Marksist]

One potential benefit of paying line workers more is that they will be happier, and will treat customers better. Of course, this is theoretical.

I agree with this in most cases, as I've noticed most stores that pay their employees a little more, I get better service. But, I've always heard that Post Office workers are paid pretty good money for what they do, and they are some of the most apathetic and bitchy customer service types I've had to deal with, even though it's not the same duties as a Costco or Wal-Mart employee, it would seem the duties of a Post Office teller wouldn't be that much harder than retail.

[Big Phil]

One potential benefit of paying line workers more is that they will be happier, and will treat customers better. Of course, this is theoretical.

I agree with this in most cases, as I've noticed most stores that pay their employees a little more, I get better service. But, I've always heard that Post Office workers are paid pretty good money for what they do, and they are some of the most apathetic and bitchy customer service types I've had to deal with, even though it's not the same duties as a Costco or Wal-Mart employee, it would seem the duties of a Post Office teller wouldn't be that much harder than retail.

Employees at the Post Office have minimal incentives to work hard. There are no rewards for good work, and there are no punishments for shitty work. It's next to impossible to get fired from ANY government job, and most union jobs.

Costco employees who work hard and are good at their jobs can expect to be rewarded with pay increases, bonuses, promotions, etc., all of which encourage good work. Those who slack off and fuck up a lot can expect to be booted out the door.

[aerius]

But, I've always heard that Post Office workers are paid pretty good money for what they do, and they are some of the most apathetic and bitchy customer service types I've had to deal with, even though it's not the same duties as a Costco or Wal-Mart employee, it would seem the duties of a Post Office teller wouldn't be that much harder than retail.

Employees at the Post Office have minimal incentives to work hard. There are no rewards for good work, and there are no punishments for shitty work. It's next to impossible to get fired from ANY government job, and most union jobs.

As a government employee who once worked in a postal facility, what Sanchez said is so true it's not even funny. An employee could tell everyone who called to fuck off and die and nothing would happen to him, he could go "a sphincter says what?" to every caller and suffer no consequences. He could have long-distance phone sex on company time and still not get fired, and about the only thing they could get fired for is getting caught red-handed stealing mail. They get nothing for doing good work, and nothing bad happens if they dick around all day. Given such a work environment, only the most dedicated workers will do decent work, everyone else falls to human nature and become lazy and/or rude.

[Jalinth]

Costco saves money by centralizing and streamlining product purchase decisions. They also carries something like 4,000 SKU's (unique products) rather than the 100,000+ that most grocery stores carry, or 200,000+ carried by Wal-Mart. Having fewer SKU's allows for greater purchasing efficiency.

As far as the floor employees suggesting things - they can certainly do so, but the bottom line is what the customers want. Costco will not purchase an item for only one or two customers.

Thanks. I don't shop at Costco enough to notice (single and limited space=not a Costco customer)

[Wicked Pilot]

That's up to the individual employer. But it's moronic of you to claim that it's irresponsible for a company to pay their employees better than the market minimum.

I never claimed that. I'm merely saying that it's irresponsible to pay your employees way more than they're worth at the expense of paying the bills. Shareholders are just like the electric company, if you don't pay them what they expect then bad things will happen to your business.

Fortunately, I doubt very much you will see an export of retail sales anytime soon.

They'll get exported straight to Wal-Mart after the take over made possible by low share prices.

I HAVE invested in them, they are part of my stock portfolio. And where did I tell you that you should invest with them as well?

Well then while the price is going down perhaps you should buy some more shares. If I and those selling are wrong, and you are right, I hereby declare my acceptance of any gloating you may wish to dish out when you strike it rich.

[Big Phil]

That's up to the individual employer. But it's moronic of you to claim that it's irresponsible for a company to pay their employees better than the market minimum.

I never claimed that. I'm merely saying that it's irresponsible to pay your employees way more than they're worth at the expense of paying the bills. Shareholders are just like the electric company, if you don't pay them what they expect then bad things will happen to your business.

What the employees are worth is clearly a value judgment. Costco says employees are worth an average of $16 per hour, with full time employment for most of the employees and solid benefits. Wal-Mart/Sam's Club says the employees are worth $8 per hour, with no benefits.

[Stormbringer]

Doesn't 'flat earnings' just mean the shares paid the same they did last year? Ooooh, sounds like slow death to me I want to invest in something that'll pay regular for decades; I'll buy all their stock.

Flat earnings is bad because it prevents you from expanding, which in the retail industry is a big problem.

Actually, the problem of it is that they're turning that money around rather than just passing it on to the shareholders. It's not hurting their expansion.

[White Haven]

2-6 weeks for a retail employee to be productive?

Bullshit!

That long for them to be able to point customers to the bathroom and work a cash register. At least several more months before they know the store well enough to be able to do even minimal customer service with anything I'd consider quality. And until you hit that mark, at the very least, you're wasting the customer's time and the time of TWO of your employees: The one who doesn't know shit, and the one who has to come over and help the one who doesn't know shit. Now, I admit I'm a little biased, my retail experience has been small-business, so you can't just be a mindless drone in that sort of setting, but as the discussion has widened to the point of turnover in retail jobs in general, I feel it applies.

[Howedar]

Costco is rather less complicated than most retail stores in layout.

[Darth Wong]

Nevertheless, the syndrome of employees who don't know shit and give you some mealy-mouthed referral to a more qualified employee in some other part of the store is well known in retail. It's annoying as hell to go to a store where none of the employees know where anything is.

[The Kernel]

I never claimed that. I'm merely saying that it's irresponsible to pay your employees way more than they're worth at the expense of paying the bills. Shareholders are just like the electric company, if you don't pay them what they expect then bad things will happen to your business.

Show me evidence of this cutting into the bottom line of the shareholders significantly because I can't find any. And no, the comments of Wall Street analysts who want to see every company showing the same corporate philosophy as Wal-Mart do not count.

They'll get exported straight to Wal-Mart after the take over made possible by low share prices.

A hostile take over? Please, I think they will need just a BIT more then that. A take over requires that they kill Costco business enough to depress their stock price significantly (and long term I might add) or else the whole endeavour becomes much too expensive.

Well then while the price is going down perhaps you should buy some more shares. If I and those selling are wrong, and you are right, I hereby declare my acceptance of any gloating you may wish to dish out when you strike it rich.

I'm not really expecting to strike it rich, but Costco is a good growth company that has a good management team with a slightly undervalued stock short-term, although I'm in it for the long haul with this one barring anything unforseen.

What I don't think you realize though is that despite the rantings of these analysts, the payement of their employees is not THAT big of a deal since although it does cut into potential stockholder dividends, Costco already has such a solid business model that it holds their stock value up by itself. Why else do you think so many companies that never paid a dividend (or even made a profit) are able to command huge stock values?