Costco: The New Anti-Walmart
I
am in the process of trying to recruit Costco to come to Iowa so we
will have a socially responsible alternative to shopping at Sam's Club
or Walmart. Will keep you posted of any developments along the way. From the NY Times:
By Steven Greenhouse
Issaquah, Wash.
Combining
high quality with stunningly low prices, [Costco] appeal[s] to upscale
customers – and epitomize[s] why some retail analysts say Jim Sinegal, [the chief executive of Costco Wholesale,] 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.”
Mr.
Sinegal begs to differ. He rejects Wall Street's assumption that to
succeed in discount retailing, companies must pay poorly and skimp on
benefits, or must ratchet up prices to meet Wall Street's profit
demands.
Good
wages and benefits are why Costco has extremely low rates of turnover
and theft by employees, he said. And Costco's customers, who are more
affluent than other warehouse store shoppers, stay loyal because they
like that low prices do not come at the workers' expense. “This is not
altruistic,” he said. “This is good business.”
He also
dismisses calls to increase Costco's product markups. Mr. Sinegal, who
has been in the retailing business for more than a half-century, said
that heeding Wall Street's advice to raise some prices would bring
Costco's downfall.
…At
Costco, one of Mr. Sinegal's cardinal rules is that no branded item can
be marked up by more than 14 percent, and no private-label item by more
than 15 percent. In contrast, supermarkets generally mark up
merchandise by 25 percent, and department stores by 50 percent or more.
To read the rest of this article, click here:
Blog For Iowa 
FYI: The first Costco in Iowa opened up in West Des Moines this spring – and has been doing very well, according to all accounts I've heard.
http://www.costco.com/Warehouse/LocationTemplate.aspx?Warehouse=788
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Wow, that's great news. I had not heard. That should help us with our efforts to get them into our local communities. When I tell folks about Walmart's unethical business practices, although dismayed, they always ask, well, where are we supposed to shop? I can actually feel good about telling them to go to Costco.
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The only thing that concerns me about openly jumping on board the Costco bandwagon: Costco is still a publicly owned company that could change radically once the founder/CEO departs.
Even Sam Walton supported American manufacturers in his time – just so the shareholders could take the exact opposite tack after Walton departed.
When possible, I still would prefer to find someplace “local” – but those places are slowly disappearing as big box becomes the rule of thumb. I guess as consumers, we will always have to be vigilant. (Although I would like to see more of my retail dollar go to businesses that bank money in Iowa.)
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I told one of my Democratic Polk Co. Supervisors, who wants more development in the east part of the county to balance the unbalanced explosion into the Dallas and Warren Counties about looking to bringing in a Costco. The city of Des Moines has had to eviserate our school district's efforts at providing sound education, because the coutny's sales tax money slated to improve the schools was not only mismanaged, but ignored suburban growth and flight. Now the inner city and urban schools will be worst and we can get another news article about how bad minorities are doing in school, gee what can we do?
The monied developer types are trying to remake the city into a glitz bigcity, where only the upper classes of whitecollar single 20-40 somethings can play, and live in the condos or lofts, or gentrify the crumbling housing to shuffle the poorer working classes of to scattered locations. Those poor kids only need enough education to work a minimum wage/service job, and compete with easier to abuse/take-advantage-of desparate immigrants.
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