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https://www.bloomberg.com/view/articles/2013-08-27/why-walmart-will-never-pay-like-costco https://www.bloomberg.com/view/articles/2013-08-27/why-walma... Walma

https://www.bloomberg.com/view/articles/2013-08-27/why-walmart-will-never-pay-like-costco https://www.bloomberg.com/view/articles/2013-08-27/why-walma... Walmart pays less because it has much lower profit margins. It serves far more customers and the average employee is a great deal less skilled. And it’s cheaper, with greater product choice. The average Walmart employee is definitely worse than the average Costco employee but Walmart is clearly the better business. It has higher gross profits, employs more people and serves more people.

Retric 8y ago
Walmart only really has great profit margins in areas without competition. So sure when it has a local monopoly it ends up with great margins, but in high competition areas the stores are far less profitable. https://www.businessinsider.com/states-where-people-spend-the-most-at-walmart-2015-8 https://www.businessinsider.com/states-where-people-spend-th...
PopeDotNinja 8y ago
That article is paywalled for me, so I did some quick research. It looks like Walmart's gross profit of 25% is almost double that of Costco's 13%. Am I doing the math correctly? >> Walmart [1] Total Revenue (TR) = 500,343,000,000 Gross Profit (GP) = 373,396,000,000 Gross Margin = GP / TR = ~25% >> Costco [2] Total Revenue (TR) = 129,025,000,000 Gross Profit (GP) = 17,143,000,000 Gross Margin = GP / TR = ~13% [1] https://finance.yahoo.com/quote/WMT/financials?p=WMT https://finance.yahoo.com/quote/WMT/financials?p=WMT [2] https://finance.yahoo.com/quote/COST/financials?p=COST https://finance.yahoo.com/quote/COST/financials?p=COST
- barry-cotter 8y ago
  I was wrong on gross margins. You’re right. Walmart still can’t adopt Costco’s business model. It sticks many more things, in much smaller units, in way, way more stores and the average employee is not as skilled. https://www.forbes.com/sites/greatspeculations/2017/02/06/the-key-difference-between-costco-and-walmart/#4b5976454306 https://www.forbes.com/sites/greatspeculations/2017/02/06/th... > While Walmart’s gross margins are more than double those of Costco’s, an efficient model with significantly higher revenues per square foot ensure that Costco’s gross earnings for the same size of a store are higher than Walmart.
dboreham 8y ago
>Walmart pays less because it has much lower profit margins. Huh? Is that a rule? So when a given corporation's GPM drops, they have to give their workers a pay cut?
- barry-cotter 8y ago
  It’s a description of the economics of a corporation. If they have so much in revenues and so much in non wage costs the difference either goes to wages or profit. If revenues drop either profits will drop or wage costs will. In the very long run your pay will tend towards your productivity but ease of replacibility will also play a role among other things. Sculptors and aerospace engineers are both highly skilled but there are many more jobs for the second than the first so they get paid more. In the long run it is almost a rule that if gpm drops wages will. Profits could also drop. The mix of compensation could change. They could keep wages the same but fire the least productive staff so the wage bill drops but the remaining workers do more work.

Retric 8y ago

Walmart only really has great profit margins in areas without competition. So sure when it has a local monopoly it ends up with great margins, but in high competition areas the stores are far less profitable. https://www.businessinsider.com/states-where-people-spend-the-most-at-walmart-2015-8 https://www.businessinsider.com/states-where-people-spend-th...

PopeDotNinja 8y ago

That article is paywalled for me, so I did some quick research. It looks like Walmart's gross profit of 25% is almost double that of Costco's 13%. Am I doing the math correctly? >> Walmart [1] Total Revenue (TR) = 500,343,000,000 Gross Profit (GP) = 373,396,000,000 Gross Margin = GP / TR = ~25% >> Costco [2] Total Revenue (TR) = 129,025,000,000 Gross Profit (GP) = 17,143,000,000 Gross Margin = GP / TR = ~13% [1] https://finance.yahoo.com/quote/WMT/financials?p=WMT https://finance.yahoo.com/quote/WMT/financials?p=WMT [2] https://finance.yahoo.com/quote/COST/financials?p=COST https://finance.yahoo.com/quote/COST/financials?p=COST

barry-cotter 8y ago
I was wrong on gross margins. You’re right. Walmart still can’t adopt Costco’s business model. It sticks many more things, in much smaller units, in way, way more stores and the average employee is not as skilled. https://www.forbes.com/sites/greatspeculations/2017/02/06/the-key-difference-between-costco-and-walmart/#4b5976454306 https://www.forbes.com/sites/greatspeculations/2017/02/06/th... > While Walmart’s gross margins are more than double those of Costco’s, an efficient model with significantly higher revenues per square foot ensure that Costco’s gross earnings for the same size of a store are higher than Walmart.

dboreham 8y ago

>Walmart pays less because it has much lower profit margins. Huh? Is that a rule? So when a given corporation's GPM drops, they have to give their workers a pay cut?

barry-cotter 8y ago
It’s a description of the economics of a corporation. If they have so much in revenues and so much in non wage costs the difference either goes to wages or profit. If revenues drop either profits will drop or wage costs will. In the very long run your pay will tend towards your productivity but ease of replacibility will also play a role among other things. Sculptors and aerospace engineers are both highly skilled but there are many more jobs for the second than the first so they get paid more. In the long run it is almost a rule that if gpm drops wages will. Profits could also drop. The mix of compensation could change. They could keep wages the same but fire the least productive staff so the wage bill drops but the remaining workers do more work.