The Wal-Mart steamroller does not flatten all it encounters.
Meet Costco Wholesale, the nation’s leading warehouse retailer. Yes, leading. It has a bigger market share than Sam’s Club, the Wal-Mart warehouse arm.
I wish Costco would come to Arkansas. Part of it is, admittedly, class bias. Costco caters to higher-income customers with specials on the likes of champagne and jewelry amid a warehouse store’s usual narrow selection of staple goods in a barebones setting.
I also learned recently — and liked what I heard — about Costco’s aggressive efforts to expand retail liquor sales. Sam’s Club pulled out every lobbying stop to carve a creative exception to Arkansas’s liquor law so it could put a retail liquor outlet under the roof of a Sam’s Club in Fayetteville. No end-arounds for Costco. In Washington, its home state, it has sued to end the price fixing that’s allowed by an anti-competitive liquor sales system with fixed wholesale markups.
But neither high-end goods nor cheap wine explains my real reason for inviting Costco to Wal-Mart’s home turf. I like the way they do business, as described recently in the New York Times.
Costco is headed by Jim Sinegal, son of a steelworker. He took only $550,000, including a bonus, to head the nation’s fifth largest retailer last year. His pay wouldn’t have kept graspy Wal-Mart exec Tom Coughlin in sunflower seeds and dog food.
Sinegal doesn’t believe, as many other CEOs do, in drawing pay that is 100 to 300 times the salary earned on the floor of his stores. He also believes in paying a living wage. Costco’s average pay is $17 an hour, which the Times said is 42 percent higher than Sam’s Club. Costco pays an astounding 92 percent of the cost of its employees’ health coverage, which includes dental coverage. Wal-Mart employees swell taxpayer-financed public health plans in Arkansas and elsewhere. Costco also covers part-time workers after six months on the job; at Wal-Mart you have to wait two years.
Costco contributes to employees’ 401k retirement plans on a sliding scale, starting with 3 percent of salary in a worker’s second year and rising to 9 percent by the 25th. Wal-Mart is rabidly anti-union. Not Costco. The Teamsters Union, which represents more than 10 percent of Costco employees, says Costco gave it the best deal of any employer in the country, including a guarantee that half its workers will be full-time.
Stock market analysts think Costco is too generous with employee pay and perks. Costco thinks higher wages are cost-effective. Employee turnover and theft are low. Most of all, its chief financial officer told me in a phone interview, “It’s the right thing to do.”
Costco stores are also fun. They regularly promote “treasure hunts,” in which specially priced items such as Waterford crystal and maybe a $10,000 string of pearls are scattered among the paper towels and drums of fryer oil.
Costco feels the heat from Wal-Mart and constantly shaves its margins. Yes, it pressures suppliers, too, a tactic with national manufacturing implications. Just the same, I mapped Costco locations in Kansas City, Des Moines and Minneapolis for my trip to Minnesota this week. Somewhere along the way, it’s my solemn duty to buy some French wine and imported cheese at a store staffed by well-insured union workers making $35,000 a year. Higher pay every day. There’s a slogan you can tie to.
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