The differences between Wal-Mart and Costco provide one of the most interesting studies in contrast going today. For any number of reasons, it seems that Wal-Mart is regularly (and maybe justifiably) villified while Costco is routinely (and maybe unjustifiably) praised.
Two articles -- one each on Wal-Mart and Costco -- recently caught my eye. The Wal-Mart article, an op-ed piece in The New York Times by Pankaj Ghemawat and Ken A. Mark took the contrarian view that because Wal-Mart paid its employees less, it is able to deliver more value to it shoppers -- and primarily those shoppers are in rural, impoverished locales. So, in other words, Wal-Mart is the best friend a poor person could ever hope to have.
The Costco article, a "news" story in the New York Times by Steven Greenhouse, was all about how Wall Street was not happy with Costco CEO Jim Sinegal because he pays his people an average of $17 per hour, which is about 42 percent more than the average Wal-Mart employee. The article also noted that Costco's average shopper has a household income of $74,000. So, in other words, Costco is the best friend a rich person could ever hope to have.
What are we to make of this?
Related Stories: | Topics:Management, sales + marketing, Wal-Mart Stores Inc., Costco Wholesale Corporation, Culture and Lifestyle, Relationships, Friendships |
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Recent Comments | 21 Total
August 8, 2005 at 10:31am by nitin sharma
well i don't agree with the analogy,the simple reason is that both the companies have different target customers and entirely different business model.
there is no question of being friendly with poor or with rich it is simply a business.
August 8, 2005 at 12:10pm by johnmoore (from Brand Autopsy)
What are we to make of this ... Wal*Mart is all about value and Costco is more about values. Both bring low prices to market. Wal*Mart does it by any means necessary and Costco does it by all means purposely. Costco seems to have more of social conscious and thus, are more conscientious in the decisions they make to bring low prices to shoppers.
August 8, 2005 at 2:58pm by Jeff
For those who wish to read the full NYT article and a related analysis from the Wall St. Journal, they are reproduced in their entirety at http://ReclaimDemocracy.org/walmart (along with an enormous library of articles, studies and commentaries on Wal-mart).
August 8, 2005 at 3:49pm by Matt
The REASON the people are poor in areas Wal-Mart is in, is exactly BECAUSE wal-mart is there, and the philosophy that wal-mart brings to companies everywhere.
August 8, 2005 at 7:59pm by Mike
Related article about Wal-Mart trying to attract the wealthier shoppers like Costco and Target does.
http://www.usatoday.com/money/industries/retail/2005-08-04-walmart-cover...
August 9, 2005 at 2:06am by Marc
If you've ever shopped at the two stores, you will see that Costco has higher quality merchandise than Wal*Mart/Sam's Club. Is it more expensive? If you are shopping for basics, like toilet paper, cereal, fresh chicken, produce, or underwear, it's not any more expensive than shopping from the Sons of Sam. I see more mini-vans than Escalades in the parking lot when I'm at Costco.
However, what brings in the higher income customers are the non-necessities like designer clothes, big-screen TV's, and hot tubs. Even so, the non-necessities are a good value. I was in Costco last week and they had men's long-sleeve Calvin Klein dress shirts for $16. $16? For something that would cost me at least $40-50 if I went to Nordstrom or even JCPenney's?
Most people with lots of money know a good buy, but (to perhaps push a stereotype) wouldn't be caught dead at Wal*Mart, surrounded by all the shoddy crap. It just also happens to be the case that people that aren't so rich can also afford and enjoy high-quality merchandise thanks to Costco.
If they can pay their people well and retain them longer while maintaining their quality of goods and services, it's good for everyone.
August 9, 2005 at 11:18am by Tom
One important contrast to consider is that Costco is a "Club" store. One pays a membership fee to shop there. WalMart is available to the masses. (Consider, WalMart operates a club store as well - Sam's Club). By virtue of charging a premium to shop at its stores, members are rewarded with "Deals" and indeed do shop WalMart Supercenters for "Values".
Another point, WalMart is changing their strategy in retail to try to steal away "the rich" consumer from Target in coming days.
August 9, 2005 at 11:38am by Eddie
If you shop both you'll find that prices are comparable, but Costco doens't have the name recognition or the market to build in areas of lower population, as Wal-Mart does. Wal-Mart could use the same pay structure as Costco, but it means the "haves" would need to fund the "have-nots" and in this America money is valued more than character. WWJD?
August 9, 2005 at 6:38pm by Bill Long
This is a classic miopic view point. Do you want to make more or spend less? Why can't you make more and spend less? Why can't you work at Costco and shop at WalMart?
When you work at Tiffany, you don't only buy at Tiffany.
August 10, 2005 at 6:58pm by Bryce
Erm, let me understand this correctly: If a company pays its employees more, that makes it a "friend of the rich?"
It seems to me that the way to cater to rich people is to hire people for as little as possible, then pass those savings on to the customers, thus enabling said customers to stay rich.
Clearly, the statistics show that Costco is attracting a wealthier customer base than Wal-Mart. But I don't see how paying your workers better could possibly be a craven ploy to get rich people to shop your store. The only way I can see employee wages factoring into the average person's decision to shop at a store is if higher wages translate into more competent, more enthusiastic service.
More likely, though, Costco is just selling less craptastic stuff. Rich people love uncraptastic stuff, or so I hear. Ask any of Sam Walton's kids.
August 11, 2005 at 10:54am by zane
I don't think paying people so little that they can't even shop in their own store is being a 'good friend' or 'friend' or even neighbor. Doing that while paying dividends of $160 million each year to each Walton family member seems a bit ...distorted.
Wal-mart blatantly exploits areas with high unemployment and limited job opportunities. There are so-o-o-o many articles, lawsuits, investigations currently ongoing with regards to Wal-mart's 'friendship' with the working poor. Even a quick check on google takes you to a handful of these in a few clicks.
It's a great way to generate input by positing a comparison of Costco and Wal-mart. But even a superficial study of Wal-mart's practices show it's no 'friend' of anyone: vendors, employees, communities, nations, even shareholders as their stock price continues to dip.
August 16, 2005 at 3:43pm by Mike Reynolds
Some posts here regarding the 'evil' Wal-Mart and their 'targeting low employment areas' is silly.
I have a choice of where I wish to sell my labor do I not? If folks think working at Wal-Mart is beneath their worth, then they have a choice to leave and seek opportunities which will compensate them 'justly'. No one is forcing a person to work at WMT.
April 8, 2007 at 2:05am by josh
i am a sams employee
i pay 15-20 bux a paycheck for a full benefits package that covers all of my health insurance i have stock options and a 401k and get a 1500 bonus every yr
i also can ask anything about my company if i have a problem i can talk to doug mcmillian or greg johnston if need be....
gregs direct line is in my cell... i have talked to him twice about a problem it was promptly resolved!
costco could pay me more but not match my benefits...
i know cause i talked to a head hunter
ps i like how someone said ppl dont hafta work for walmart we enjoy it thats why we do
January 11, 2008 at 2:00pm by CHuck
COSTCO PAYS GOOOD... STOP HATING. APPLY FOR A JOB.. WALL STREET MIND YOUR BUSINESS. THE AVERAGE BROKER AT A REAL FIRM MAKES ABOUT 300,000 A YEAR
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