Liberals love to equate Walmart with Costco. It goes something like, and read it with Robert Kennedy's whiny I'm-smarter-than-you voice, 'If Costco can pay its employees better wages and make a reasonable profit, why can't Walmart? After all they are both retail stores' But anyone with even a basic understanding of business would know that they have radically different business plans.
Lets start with a post by Rumble just the other day. He said that Costco pays higher wages and so should Walmart, then he posted the following quote; Costco, the second-largest U.S. retailer by revenue, has largely shaken off the malaise that has hit retail competitors continuing to attract shoppers as its rivals have struggled Costco drew 4.7% more shoppers to stores in the quarter from a year ago.
The warehouse retailer’s primary source of profit is membership fees, not sales from its 686 stores. Membership revenue allows Costco to offer discounted products from large-screen TVs and gasoline to organic string cheese, drawing more people to its stores. In the latest period, membership fees rose 2.2% to $785 million.
So in the very quote he posted, it states that Costco gets its 'primary source of profits' from membership fees which Walmart does not charge. Difference number one.
But looking at how each conducts in businesses will show other major differences. Costco has about 4000 SKU's or barcodes for individual items. That means they have 4000 items to enter into their inventory/checkout computer systems. 4000 items that they place onto the sales floor. 4000 items that are warehoused. 4000 items that need to be shipped and warehoused. 4000 items that need to be updated. 4000 items that require price changing. Walmart has 80,000 to 104,000 depending on store size. Big difference number two.
Costco is a bulk retailer, meaning they sell items in large packages that are displayed on pallets on the floor. That means to stock items, an employee drives a forklift, drops a pallet on the floor, and cuts open the shrink wrap... all in a few minutes. Walmart pays people to take each item off the pallet and place it in the proper bin on shelves, aligned so as to display the face of the product at the customer... a very labor intensive process.
And since Walmart's items are displayed on shelves in smaller units, Walmart has a higher rate of theft and a higher rate of damaged products that need to be replaced. (People often open packages and return them to the shelves. They also get dirty by being handled.) Differences three and four. It also requires a lot of labor to striaghten out items messed up by customers to keep displays looking neat and organized. Difference number five.
Lets look at the checkout line. Walmart's average transaction, known as the ticket, i about 65$ Costco's is around $200. That means checking out ten people at Walmart generates $650 in sales and for Costco that would be around $2000. So in a days work, the Costco check out clerk generates a lot more sales than the Walmart clerk, allowing for a higher pay rate. It may be possible that since Costco sales large items, its clerks may process that $200 ticket much faster. If they are 50% faster, they could be generating $3000 for every $650 at Walmart. Difference number six and seven.
Since Walmart has 80-104,000 items it needs much larger stores, larger warehouses, and more trucks to transport stuff. Thats a lot of fixed costs that Costco doesn't have. Difference number eight.
So you see, from warehousing to shipping, to display to checkout, there really is no comparison to the two companies. Walmart's is much more labor intensive with a higher fixed cost of infrastructure and no membership fees to fall back on. I am sure that an expert within the industry can point to more that I am not aware of. But this should be enough to end the silly argument that Walmart should pay the same for labor as Costco.
Lets start with a post by Rumble just the other day. He said that Costco pays higher wages and so should Walmart, then he posted the following quote; Costco, the second-largest U.S. retailer by revenue, has largely shaken off the malaise that has hit retail competitors continuing to attract shoppers as its rivals have struggled Costco drew 4.7% more shoppers to stores in the quarter from a year ago.
The warehouse retailer’s primary source of profit is membership fees, not sales from its 686 stores. Membership revenue allows Costco to offer discounted products from large-screen TVs and gasoline to organic string cheese, drawing more people to its stores. In the latest period, membership fees rose 2.2% to $785 million.
So in the very quote he posted, it states that Costco gets its 'primary source of profits' from membership fees which Walmart does not charge. Difference number one.
But looking at how each conducts in businesses will show other major differences. Costco has about 4000 SKU's or barcodes for individual items. That means they have 4000 items to enter into their inventory/checkout computer systems. 4000 items that they place onto the sales floor. 4000 items that are warehoused. 4000 items that need to be shipped and warehoused. 4000 items that need to be updated. 4000 items that require price changing. Walmart has 80,000 to 104,000 depending on store size. Big difference number two.
Costco is a bulk retailer, meaning they sell items in large packages that are displayed on pallets on the floor. That means to stock items, an employee drives a forklift, drops a pallet on the floor, and cuts open the shrink wrap... all in a few minutes. Walmart pays people to take each item off the pallet and place it in the proper bin on shelves, aligned so as to display the face of the product at the customer... a very labor intensive process.
And since Walmart's items are displayed on shelves in smaller units, Walmart has a higher rate of theft and a higher rate of damaged products that need to be replaced. (People often open packages and return them to the shelves. They also get dirty by being handled.) Differences three and four. It also requires a lot of labor to striaghten out items messed up by customers to keep displays looking neat and organized. Difference number five.
Lets look at the checkout line. Walmart's average transaction, known as the ticket, i about 65$ Costco's is around $200. That means checking out ten people at Walmart generates $650 in sales and for Costco that would be around $2000. So in a days work, the Costco check out clerk generates a lot more sales than the Walmart clerk, allowing for a higher pay rate. It may be possible that since Costco sales large items, its clerks may process that $200 ticket much faster. If they are 50% faster, they could be generating $3000 for every $650 at Walmart. Difference number six and seven.
Since Walmart has 80-104,000 items it needs much larger stores, larger warehouses, and more trucks to transport stuff. Thats a lot of fixed costs that Costco doesn't have. Difference number eight.
So you see, from warehousing to shipping, to display to checkout, there really is no comparison to the two companies. Walmart's is much more labor intensive with a higher fixed cost of infrastructure and no membership fees to fall back on. I am sure that an expert within the industry can point to more that I am not aware of. But this should be enough to end the silly argument that Walmart should pay the same for labor as Costco.
