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Why Wal-Mart Will Never Pay Like Costco

249 points by georgecmu 13y ago

iopq 13y ago
that means they can afford to pay their workers around 3,000 more a year and their profit margins will the be the same as costco's
andrewflnr 13y ago
Um, where are the actual numbers of SKUs at Walmart and Costco? She implies they're in the graphic, but they're not. She mentions 108,000 SKUs at Walmart further down, but I have no idea what it is at Costco, except that it's less than 108,000.
orionblastar 13y ago
The article is Slashdotted, I cannot load it. Let me explain something. Walmart follows 'classical management' of negative reinforcement and cutting expenses down to the bone including salaries, benefits, and other stuff. They are willing to pay executives millions while letting most employees work for slave wages with little to no benefits to cut down on costs as much as possible. Costco follows 'participatory management' in which management gets involved with the employees and empowers them to make their own decisions. Executives are not paid millions and their salaries are based on how well the company does to encourage growth. Employees are paid more so they will be more productive and with good benefits to take care of health problems and family problems so they don't interfere with work. If the company is losing money, they do job cost analysis to see what products and services cost more to support than the revenue they bring in, and then quality is improved on those services and products and if it cannot then those products and services get cut instead of the people and new products and services replace them. Steve Jobs did this with Apple, cut out products and services that didn't bring in enough revenue to justify keeping them, cut his own salary as the iCEO, improved the quality of products and services or come up with new ones to replace them. Walmart and other 'classic management' companies just don't understand how to do that so they take it out on the employees instead.
- xb95 13y ago
  Wal-Mart has listed key executive compensation of around $63m USD this past year [http://insiders.morningstar.com/trading/executive-compensation.action?t=WMT http://insiders.morningstar.com/trading/executive-compensati...] and reported yearly revenue of $473,000m USD [http://finance.yahoo.com/q/ks?s=WMT http://finance.yahoo.com/q/ks?s=WMT]. I'd argue that spending 0.01% of revenue on key executive compensation (which is the 'paying executives millions' you talk about) is irrelevant to Wal-Mart overall and how much they can or can't pay their workers. Even if you stripped the executive compensation and gave it to the workers (2.2m of them), you'd only be handing out $30 to each person. That's a few hours of work total, and amortized over a year? Not a factor at all in the grand scheme of things. ... The article is well worth a read. It's interesting and insightful and discusses more interesting things like business models, target demographics, value-mindedness, etc. I recommend it if you can get it to load. (It was fine for me.)
  - curveship 13y ago
    That's $63m to just the top 6 executives. Total executive compensation would be far far greater. And for comparison, Costco paid its top 6 only $19m, which I think is the GP's point: http://insiders.morningstar.com/trading/executive-compensation.action?t=COST http://insiders.morningstar.com/trading/executive-compensati... .
    - furtivefelon 13y ago
      I don't know, seems pretty reasonable, Costco revenue is 105B. Walmart has >4x revenue, and 19m*4=76m, more than Walmart. Based on your comparison, Walmart is paying their executives fairly.
      - yardie 13y ago
        About as reasonable as getting 9 women to make a baby in 1 month. This would only be true if those 6 executives were doing 4x the work of the executies at Costco. Conservatively, they might be doing 1.5x or even 2x the work. But I doubt they are putting in 160 hours a week.
tokenadult 13y ago
Having read the interesting article submitted here, I have to say that it is refreshing to see an analysis of different approaches to retailing that focuses not only on the demographic groups served by the different retailers, but also on the SKU (stock-keeping unit) count for each retailer. Having more different products in stock is more expensive than having fewer different products in stock. Carrying "name" brands is usually more expensive than carrying "store" brands. There are plenty of other differences between the shopping experience at Wal-Mart and Costco. A peculiarity of local geography is that we find that the two Costco stores at our end of the Twin Cities metropolitan area are just never on our way to anywhere else, so we let our Costco membership lapse after just one year. For quite the same reason, we hardly ever shop at Wal-Mart. But we shop at Sam's Club (the Wal-Mart version of a warehouse store like Costco) all the time, simply because it is on my way to work and largely on the way to many of our other trips during the week. Today we built a trip to Aldi into our schedule while our daughter was at soccer practice about halfway from our house to that store. We love to minimize driving--driving costs both money and time. Some stores cannot thrive unless they are within SHORT drives of many customers. Some of those stores have to extract a lot of productivity out of each worker to pay the workers even minimum wage. I still wonder when Amazon is going to go all-in in setting up major same-day delivery centers in most metropolitan areas in the United States. That could have a revolutionary influence on my shopping habits. And if robots can do more of the stocking of shelves, and eventually self-driving cars do most of the delivering, that business model could end up with huge market share. I'm very happy when workers at menial retail jobs are paid more--I have had such jobs (at Sears and at Target, many years ago). But they best gain opportunity to advance themselves economically when they also can save on their own consumer spending in retail stores. Everyone likes low prices day in and day out.
- thetrb 13y ago
  I'd love to have an Aldi in the Silicon Valley, at least if the concept is similar to the ones in Germany.
  - billybob255 13y ago
    The ones in MI seem to be similar to the ones in Germany.
idunno246 13y ago
Walmart tried to move into a dilapidated mall in my neighborhood and everyone fought it and they couldnt. They moved a mile down the street to a slightly less wealthy neighborhood, in a dilapidated strip mall. Five years later, the strip mall with walmart is bustling with business and the other mall is still mostly empty. Wasted opportunity to get business into the township. Even though I generally wouldn't shop there, I have no issue with walmart, for exactly the reasons this author suggests I wouldn't
- Afforess 13y ago
  I agree. I tend to avoid Walmart due to its low quality on a lot of the store brand goods, but don't actually have any issues with how they run their business. They aren't exactly hiding that they are a low-cost retailer. If people have problems with the wages Walmart pays they should stop attacking Walmart and go deal with the people who actually set the minimum wages: your congress critter.
  - cantankerous 13y ago
    For what it's worth, people do try that. Wal-Mart tends to show up and throw its weight around when this happens.
  - Shivetya 13y ago
    Wal-Mart grocery sells many if not all the same name brands my local grocery stores do; Publix and Kroger for Atlanta metro. They just sell them so much cheaper I only buy at the others when I am lazy or there is a BOGO Going to any of my local Wal-Marts with grocery and it is the most crowded place of the store. While their clothing sections and miscellaneous house hold goods sections can be dodge the electronics section, automotive, and garden, sell many name brands I see elsewhere.
- nsxwolf 13y ago
  What you say cannot possibly be true. I have been told time and time again that the arrival of a Walmart always spells doom for adjacent businesses, and the people who told me that seemed very sure about themselves.
bsbechtel 13y ago
I'd be interested in seeing how the distribution of pay for all employees, through a Gini coefficient or other means, stacks up for Walmart vs Costco.
RandyH 13y ago
Is this pretty much the market speaking and saying that Wal-Mart has a crumby business? Especially factoring in that a lot of people couldn't even work there without government subsidies in the form of food stamps, etc. http://www.motherjones.com/mojo/2013/06/report-walmart-forces-employees-dole-taxpayers http://www.motherjones.com/mojo/2013/06/report-walmart-force...
- twoodfin 13y ago
  I don't get this "subsidy" argument. Bob pays $200 for his rent, and $150 for groceries. He applied for a job at Costco and was turned down, but Walmart offered him a job so he took it. Without government benefits, he couldn't afford his rent and he couldn't afford his groceries. Without his job at Walmart, he'd be eligible for even more benefits. But somehow it's Walmart that's being subsidized, and not his grocer or his landlord? Not to mention Costco, who's paying him $0, while Walmart pays him something, at least.
  - iopq 13y ago
    if not for government programs, nobody would work at Walmart they would literally not be able to afford to work there, so they wouldn't even accept the job if offered because it wouldn't pay their expenses since the opportunity cost would be too great a few retirees or people living with parents would work there, but not enough to fill out their work force this is because wages for unskilled labor tend to approach the minimum you have to pay for people to live and since the government is footing the bill to reduce that minimum to very little, Walmart can get away with paying very little if government decided to take away all benefits for people currently employed, Walmart would have to raise their wages because the workers would quit in droves to sit on welfare instead
    - yummyfajitas 13y ago
      if not for government programs, nobody would work at Walmart...they wouldn't even accept the job if offered...opportunity cost would be too great Could you explain, ideally by using numbers (either real or example) to illustrate your argument? Something along the lines of: No government subsidies, no job at walmart: earnings + unearned income = $x No govt subsidies, job at walmart: earnings + unearned income = $y etc.
SeanLuke 13y ago
Through ambiguous verbage, this author very carefully skirts an unfortunate fact which ruins his argument. And that is: Trader Joe's has a very high number of employees per square foot. TJs is swarming with employees. They're trained to do every task and can fill in for one another. My local TJs, a microscopic one and the smallest in DC by far, usually has over 15 employees, often 20, day and night. I know: I counted them. I think that this guy is saying that Wal-Mart can't do what Costco does because it has more SKUs and thus a higher density of employees. But TJ's density is much higher still, and it pays like Costco does.
- cpleppert 13y ago
  >>I think that this guy is saying that Wal-Mart can't do what Costco does because it has more SKUs and thus a higher density of employees. But TJ's density is much higher still, and it pays like Costco does. It isn't the density per se, it is the density of a a much larger store that doesn't have the margins that trader joes has. They are two fundamentally different business models. Retails stores targeted at upscale consumers can afford to spend on salaries to give the service that their customers want. Wal-Mart needs low prices and lots of products to satisfy theirs.
- sseveran 13y ago
  He is saying its a fundamentally different business. A higher number of SKUs necessitates a much larger space and lower per employee productivity. A Trader Joes customer is willing to pay for customer service and a Walmart customer is not. As a society we may say well thats an unacceptable attitude on the part of Walmart's customers and then put them out of business. But at the end of the day its not like Walmart's executives would be the ones picking up the tab, its the customers.
- enoch_r 13y ago
  The (female) author's point isn't that "Wal-Mart can't do what Costco does because it has more SKUs and thus a higher density of employees." It's that Wal-Mart, Costco, and TJ's have so many differences on so many axes that it is quite silly to make naive comparisons between their level of employee compensation while ignoring everything else that makes them different. I find this example particularly baffling, as one visit to TJ's should be all one needs to recognize that it's not even in the same category as a store like Wal-Mart.
deleted 13y ago
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coin 13y ago
"The average American cashier makes $20,230 a year, a salary that in a single-earner household would leave a family of four living under the poverty line." 20k is on the low side, but one should still consider their own income before having children, especially two.
- artsrc 13y ago
  I don't want a world where people consider their own income before having children and find that they can't afford to have children and not live in poverty, and have to miss out on having children.
  - res0nat0r 13y ago
    From the opposite end of the spectrum: If everyone could have as many children as they wanted regardless of any outside consequences, wouldn't that be just as harmful or not more?
  - tomjen3 13y ago
    Restrutoring your argument: >I don't want a world where people consider their own income before going on a trip around the world _and_ find that they can't afford to take a trip around the world and not live in poverty, and have to miss out on traveling the world. Everything, including children, are a cost. Is it not better that people look at the cost before, rather than after, they make a purchase? Especialy with something as important as a childs wellbeing. Anyway it takes a lot less money to raise a family than you might think it does. My grandparents raised my mother on next to nothing, my parents raised me on very little initially.
- dylangs1030 13y ago
  They should...but if everyone did that we'd have much less population growth. Most people, particularly lower classes, don't particularly care. I don't have a citation, but it's kind of self-evident. At the very least, people don't expect a family to cost so much, and think if they're prepared for it beforehand they'll be fine. You can't be prepared for poverty with a family.
- 13y ago
jusben1369 13y ago
I don't think I missed it but I am confused why the author steered clear of some really interesting data. Based on the table Walmart has 2X the profit margin of Costco. Walmart's doing around 4.5x topline revenue but over 9x the total profit amount. For the author's central point to hold true those numbers need to be more closely aligned. That is, they need to be roughly the same in % terms. They aren't, which means one or both of the players are doing something substantially different in their approach. Given that labor costs are the single largest expense for these types of business it's not unreasonable to reach the conclusion of those she's rebutting with this article. Namely that Walmart is overly maximizing profits based on the back of paying extremely low wages. To put it another way, if for some reason Walmart was told to bring it's margins in line with Costco the easiest way to do that would be to bring your wages up and keep your prices the same. Let's do back of the envelope math based on the chart in the article. If Walmart had the margins of Costco rather than the current ones that would see it's profit dip from $15.6 billion to $7.53 billon. That in turn would "free up" $8 billion in what is now pure profit. With 2 million global employees you could pay them all $4K more. That's a 20% salary increase for the basic salary they highlighted of $20K per year. I'm not bashing Walmart. I'm just pointing out that Costco seems to have made the decision to have meaningfully smaller margins than Walmart. Given where the bulk of their costs lie they must have had the conversation more than once about paying folks less to move those margins up to please Wall Street more. Yet they have decided not to do that. Perhaps it's simply because they believe the business benefit around being easier for them to be accepted in new communities (and thus grow) based on the real and perceived perception that they treat their workers well. PS: Anecdotally Walmart opened near us two months ago. I have now been there 4 or 5 times. I am struck by just how many people there are working there on the floor. There seem to be too many whenever I'm there. They look bored and so congregate in groups and shoot the breeze. I couldn't get that out of my mind as the author kept stressing they really need a lot more employees.
- dylangs1030 13y ago
  I used to work in a supermarket and in a department store. Those people you see shooting the shit and slacking off are necessary. The reason why they're there is because if the store suddenly gets packed, they will be split up and given tasks. They're insurance. You can't not have them there, or you'll get customer complaints when they can't find someone to help them, there's too few lanes, etc. And that's just during the day in front-end customer facing situations. They're constantly called back to inventory to do warehouse-type jobs, even if they're cashiers.
onoj 13y ago
I have heard of this journalist before. Apart from the absolute lack of an explanation as to WHY Walmart cannot pay higher wages (spoiler - it's complicated!) also, I find the link in the S.H.A.M.E. project of interest. http://shameproject.com/profile/megan-mcardle/ http://shameproject.com/profile/megan-mcardle/
- jusben1369 13y ago
  Meh. Either her content is substantially right or it's substantially wrong. Let's just debunk her theories if we don't believe her vs personally attacking her. This "She's a conservative activist from the heart of Koch!" is no different (or less offensive) than "She's a bleeding heart liberal from Berkeley!"
  - gchpaco 13y ago
    I have a limited amount of time in my life and no wish to spend it playing "spot the logical fallacy in every paragraph" with McArdle. I have found it more efficient to learn that she is a feckless human being who will lie (by omission and otherwise) and entirely ignore her than teasing out the truth in her writings, which would require reading in detail the primary sources she is allegedly summarizing as well as the ones she silently omits. Calling ad hominem is well and good and something to keep in the back of your mind, but I tend to agree with Daniel Davies that "giving known liars the benefit of the doubt" is more likely to steer you wrong.
  - onoj 13y ago
    There was a lot of content, but the premise of the article - that it would explain why Walmart paid less than Costco, was missing. From that I wondered if the article itself was just some form of PR or politically motivated rather than unbiased journalism.
  - crdoconnor 13y ago
    >Meh. Either her content is substantially right or it's substantially wrong. Let's just debunk her theories Let's also get some context about where these theories are coming from. If people understood why people like her are shills and who they're shills for they might be a little more skeptical.
jpitz 13y ago
The size of the SKU assortment has such a profound impact on so very many areas of the business, I would venture to say that if two retailers don't have a comparably sized SKU assortment, they're well-nigh incomparable.
CleanedStar 13y ago
>lower income households cant afford to pay extra for top-notch service...several people will e-mail, or tweet, or come into the comments to say theyd be happy to pay 25 percent more for their Big Mac or their Wal-Mart goods...However, there are people for whom the McDonald's Dollar Menu is a bit of a splurge, and Wal-Marts prices mean an extra pair of shoes for the kids. Those people might theoretically favor high wages, but they do not act on those beliefs... I dont know how much more they could afford to pay before they started to lose customers Higher in the piece, she includes an infographic which says Wal-Mart makes $7,428 profit for every employee it has. It also says Wal-Mart has a profit margin of 3.5% to Costco's 1.7%. It seems that the only method that occurs to her where the workers can get higher wages is by raising prices. Let us consider Christy Walton, who is worth over $27 billion. She is worth $27 billion because the son of Sam Walton used to plow her pussy. Since an heir blew his load into her hole, she collects a sizable portion of the $6 billion a year Wal-Mart sends out in dividends. She's a parasite. She is a receptacle for the jism of an heir. Workers bust their ass at Wal-Mart all day, and create wealth. She laid on her back for an heir, so she gets to parasitically expropriate the surplus labor value of the workers creating wealth at Wal-Mart. They work but don't get paid - the dividends from the hours they work, the wealth they create are sent to her. She is as useless as the Romanovs were in the moments before the bullets from a Bolshevik firing squad tore them to shreds. She has no connection to production except as a leech, no connection to the workers creating wealth and stocking Wal-Mart shelves except as a parasite. THIS is reality. There is all kinds of bullshit, all kinds of nicey-nice little Goebbels commissar intellectual whore lackeys like McArdle around, scribbling for their pay and their masters why the parasites like Christy Walton should live so well, and why those doing all the work should be paid so little. While they would like to blot out people's remembrance of history, two centuries ago, capitalist's had almost no power. Their champion, Napoleon, was about to be exiled to Saint Helena as the Bourbon Restoration took hold, and the last vestige of capitalist power on continental Europe was about to be stamped out. By the time several decades later capitalists became coming into power, they were almost immediately hit with the Paris Commune, and then the October Revolution. Every power always tries to make it sound as if they have the Blessing of God, that they were around forever, will be around forever, are all powerful etc. The fact is that the powers that be having to write out screeds on how Wal-Mart workers should be paid less is a sign of a degenerating system. In the early 1960s, American intellectuals, writers etc. had a brighter idea of the future. They wanted to improve STEM in schools, fund things like the MIT AI lab and SAIL, catch up and beat the Union of Soviet Socialist Republics in the Space Race etc. Now they spent their time propounding how they can't make it any more, and have to shake the last pennies out of Wal-Mart workers pockets because they don't know how to make sustainable profits any more. And one of their biggest problems according to former GE CEO Jack Welch is overproduction/underconsumption. Yet their solution is to strip consumers of dollars, and send it to these heirs, who then have nowhere to invest in. It's an inherent contradiction within the economic system, just like feudalism and slavery and hunter-gather societies all had their own internal contradictions which ultimately destroyed them and led to new forms of production.
MikeCapone 13y ago
A lot of what I knew about Walmart came from third party sources (activists, whatever), so I decided to go to a primary and read Sam Walton's book, and I must say it gave me a new appreciation and understanding for the vast machine that is Walmart. I highly recommend it: http://www.amazon.com/Sam-Walton-Made-In-America/dp/0553562835 http://www.amazon.com/Sam-Walton-Made-In-America/dp/05535628...
- philwelch 13y ago
  Sam Walton has been dead for decades now, and many of his ideas (giving stock to employees, even store workers) made more sense for the early growth stages he oversaw than the company that exists today.
  - MikeCapone 13y ago
    Indeed. Not sure what that has to do with what I wrote. The history of Walmart is still the same, and that's what I found so interesting.
    - philwelch 13y ago
      The history of Wal-Mart during Sam Walton's life is decades removed from the company's business practices today.
      - MikeCapone 13y ago
        True, but I never said it was a book about today's Walmart, just that I found it interesting to learn about that company's history and that I recommend the book.
        MikeCapone 13y ago
        To which I'll add: the past helps better understand the present...
zwieback 13y ago
Well written article, enjoyed it although I also noticed the much-higher margin Walmart has. It's very obvious that Walmart allows less wealthy people to buy more. Paradoxically, the very people suffering from stagnant blue-collar wages are Walmart's customers.
deleted 13y ago
[deleted]
ebbv 13y ago
As she links in the post, she wrote basically this same article almost a year ago. Why are we rehashing it?
vbnmvbn 13y ago
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MOSANTO EARNING MONEY FOR NANO COMUTERS SELL IN FDA UN INVESTIGATED FOOD. DO YOU KNOW WHAT IS ATOMIC FORCE MICROSCOPY???????. EUROPEAN (ROB) THE SATELITAL TERRORIST DIRECTOR. DO YOU KNOW THEY ARE SEEING THIS TEXTS AND DENOUNCES UNTIL 2000. WE DEMAND 1.000.000 DOLARS PER EACH DAMAGED TELOMER. http://www.pgiorg.blog.com http://www.pgiorg.blog.com SERIAL NARCOTRAFICANT POLITICS. ENGLAND QUEEN & HARPER – GENOCIDAL PROTECTOR. MOSANTO EARNING MONEY FOR NANO COMUTERS SELL IN FDA UN INVESTIGATED FOOD. DO YOU KNOW WHAT IS ATOMIC FORCE MICROSCOPY???????. EUROPEAN (ROB) THE SATELITAL TERRORIST DIRECTOR. DO YOU KNOW THEY ARE SEEING THIS TEXTS AND DENOUNCES UNTIL 2000. WE DEMAND 1.000.000 DOLARS PER EACH DAMAGED TELOMER. http://www.pgiorg.blog.com http://www.pgiorg.blog.com SERIAL NARCOTRAFICANT POLITICS. ENGLAND QUEEN & HARPER – GENOCIDAL PROTECTOR. MOSANTO EARNING MONEY FOR NANO COMUTERS SELL IN FDA UN INVESTIGATED FOOD. DO YOU KNOW WHAT IS ATOMIC FORCE MICROSCOPY???????. EUROPEAN (ROB) THE SATELITAL TERRORIST DIRECTOR. DO YOU KNOW THEY ARE SEEING THIS TEXTS AND DENOUNCES UNTIL 2000. WE DEMAND 1.000.000 DOLARS PER EACH DAMAGED TELOMER. http://www.pgiorg.blog.com http://www.pgiorg.blog.com SERIAL NARCOTRAFICANT POLITICS. ENGLAND QUEEN & HARPER – GENOCIDAL PROTECTOR. MOSANTO EARNING MONEY FOR NANO COMUTERS SELL IN FDA UN INVESTIGATED FOOD. DO YOU KNOW WHAT IS ATOMIC FORCE MICROSCOPY???????. EUROPEAN (ROB) THE SATELITAL TERRORIST DIRECTOR. DO YOU KNOW THEY ARE SEEING THIS TEXTS AND DENOUNCES UNTIL 2000. WE DEMAND 1.000.000 DOLARS PER EACH DAMAGED TELOMER. http://www.pgiorg.blog.com http://www.pgiorg.blog.com SERIAL NARCOTRAFICANT POLITICS. ENGLAND QUEEN & HARPER – GENOCIDAL PROTECTOR. MOSANTO EARNING MONEY FOR NANO COMUTERS SELL IN FDA UN INVESTIGATED FOOD. DO YOU KNOW WHAT IS ATOMIC FORCE MICROSCOPY???????. EUROPEAN (ROB) THE SATELITAL TERRORIST DIRECTOR. DO YOU KNOW THEY ARE SEEING THIS TEXTS AND DENOUNCES UNTIL 2000. WE DEMAND 1.000.000 DOLARS PER EACH DAMAGED TELOMER. http://www.pgiorg.blog.com http://www.pgiorg.blog.com SERIAL NARCOTRAFICANT POLITICS. ENGLAND QUEEN & HARPER – GENOCIDAL PROTECTOR. MOSANTO EARNING MONEY FOR NANO COMUTERS SELL IN FDA UN INVESTIGATED FOOD. DO YOU KNOW WHAT IS ATOMIC FORCE MICROSCOPY???????. EUROPEAN (ROB) THE SATELITAL TERRORIST DIRECTOR. DO YOU KNOW THEY ARE SEEING THIS TEXTS AND DENOUNCES UNTIL 2000. WE DEMAND 1.000.000 DOLARS PER EACH DAMAGED TELOMER. http://www.pgiorg.blog.com http://www.pgiorg.blog.com SERIAL NARCOTRAFICANT POLITICS. ENGLAND QUEEN & HARPER – GENOCIDAL PROTECTOR. MOSANTO EARNING MONEY FOR NANO COMUTERS SELL IN FDA UN INVESTIGATED FOOD. DO YOU KNOW WHAT IS ATOMIC FORCE MICROSCOPY???????. EUROPEAN (ROB) THE SATELITAL TERRORIST DIRECTOR. DO YOU KNOW THEY ARE SEEING THIS TEXTS AND DENOUNCES UNTIL 2000. WE DEMAND 1.000.000 DOLARS PER EACH DAMAGED TELOMER. http://www.pgiorg.blog.com http://www.pgiorg.blog.com SERIAL NARCOTRAFICANT POLITICS. ENGLAND QUEEN & HARPER – GENOCIDAL PROTECTOR. MOSANTO EARNING MONEY FOR NANO COMUTERS SELL IN FDA UN INVESTIGATED FOOD. DO YOU KNOW WHAT IS ATOMIC FORCE MICROSCOPY???????. EUROPEAN (ROB) THE SATELITAL TERRORIST DIRECTOR. DO YOU KNOW THEY ARE SEEING THIS TEXTS AND DENOUNCES UNTIL 2000. WE DEMAND 1.000.000 DOLARS PER EACH DAMAGED TELOMER. http://www.pgiorg.blog.com http://www.pgiorg.blog.com SERIAL NARCOTRAFICANT POLITICS. ENGLAND QUEEN & HARPER – GENOCIDAL PROTECTOR. MOSANTO EARNING MONEY FOR NANO COMUTERS SELL IN FDA UN INVESTIGATED FOOD. DO YOU KNOW WHAT IS ATOMIC FORCE MICROSCOPY???????. EUROPEAN (ROB) THE SATELITAL TERRORIST DIRECTOR. DO YOU KNOW THEY ARE SEEING THIS TEXTS AND DENOUNCES UNTIL 2000. WE DEMAND 1.000.000 DOLARS PER EACH DAMAGED TELOMER. http://www.pgiorg.blog.com http://www.pgiorg.blog.com SERIAL NARCOTRAFICANT POLITICS. ENGLAND QUEEN & HARPER – GENOCIDAL PROTECTOR. MOSANTO EARNING MONEY FOR NANO COMUTERS SELL IN FDA UN INVESTIGATED FOOD. DO YOU KNOW WHAT IS ATOMIC FORCE MICROSCOPY???????. EUROPEAN (ROB) THE SATELITAL TERRORIST DIRECTOR. DO YOU KNOW THEY ARE SEEING THIS TEXTS AND DENOUNCES UNTIL 2000. WE DEMAND 1.000.000 DOLARS PER EACH DAMAGED TELOMER. http://www.pgiorg.blog.com http://www.pgiorg.blog.com SERIAL NARCOTRAFICANT POLITICS. ENGLAND QUEEN & HARPER – GENOCIDAL PROTECTOR. MOSANTO EARNING MONEY FOR NANO COMUTERS SELL IN FDA UN INVESTIGATED FOOD. DO YOU KNOW WHAT IS ATOMIC FORCE MICROSCOPY???????. EUROPEAN (ROB) THE SATELITAL TERRORIST DIRECTOR. DO YOU KNOW THEY ARE SEEING THIS TEXTS AND DENOUNCES UNTIL 2000. WE DEMAND 1.000.000 DOLARS PER EACH DAMAGED TELOMER. http://www.pgiorg.blog.com http://www.pgiorg.blog.com
tonydiv 13y ago
For those interested in learning more about Costco, this is the most informative, fascinating, and mind-blowing report I have ever read: Understanding Costco by Coriolis Research (namely, Tim Morris). http://www.coriolisresearch.com/pdfs/coriolis_understanding_Costco.pdf http://www.coriolisresearch.com/pdfs/coriolis_understanding_... Some mind blowing facts: 1. They pay their employees $10-$17/hr as opposed to Walmart (as discussed in the article) 2. CEO earned 350k in 2012, only twice that of a store manager at Costco 3. Margins are razor thin. In fact, an employee got yelled at for selling something at a higher margin (even though all the products were successfully sold within a week) 4. ~40% of Californians have a membership 5. 30% of inventory is at the store within 8 hours *Note: My employer is a consultant for Costco, and I might be too, so I'm definitely bias, but I love the company.
- scottjad 13y ago
  CEO earnings are generally much more extensive than just the salary (I'm not judging, just saying). This link seems to indicate that the compensation was maybe $4.8 million (basic compensation fiscal year 2012) to over $10 million (options, WARNING I'm not sure how to read these so just addding all of them together) http://www.reuters.com/finance/stocks/officerProfile?symbol=COST.O&officerId=64972 http://www.reuters.com/finance/stocks/officerProfile?symbol=...
- nitid_name 13y ago
  > 3. Margins are razor thin. I seem to recall reading their markup is <17%, no more than one part in six.
  - tonydiv 13y ago
    Costco's gross margin: 12.5% Safeway's gross margin: 29.6% Costco's ROIC: 17.8% Safeway's ROIC: 4.9%
cantankerous 13y ago
Wal-Mart’s customers expect a very broad array of goods, because they’re a department store, not a specialty retailer; lots of people rely on Wal-Mart for their regular weekly shopping. The retailer has tried to cut the number of SKUs it carries, but ended up having to put them back, because it cost them in complaints, and sales. That means more labor, and lower profits per square foot. It also means that when you ask a clerk where something is, he’s likely to have no idea, because no person could master 108,000 SKUs. Having done a few years time in retail, I find this part a bit telling. I'm curious if the author has ever worked in a department store? Many department stores assign various employees to ....departments in the store. The actual SKU count you need to mentally juggle in your head is a fraction of what the entire store carries. Increasing the number of employees in a department and paying them better should give you a better knowledge on the floor of where something is if only because customers can find a department member. In my Wal-Mart it seems like you'd be lucky to find a department member in any particular department, except maybe automotive or electronics. Economic realities notwithstanding about where the money comes from to hire more employees or pay them more of course.
- tanzam75 13y ago
  She uses the term "department store" incorrectly. She means "hypermarket," where groceries are sold alongside general merchandise.
  - cantankerous 13y ago
    Perhaps so, but still. Wal-Mart segments its departments like a department store would. Groceries are usually on one side of the store. Outdoor and auto are usually in a corner near each other. Electronics is its own thing. Home Improvement, Pet, Beauty, Pharma, Household, Crafts...they're all segmented by where their assigned shelf-space is. Each one has folks that are in some way assigned to it. This is my point.
    - Zikes 13y ago
      Segmentation at the end point doesn't necessarily mean that those 100,000+ SKUs under one roof isn't a lot. There are many places in the retail operations process where it's still a very big deal, including shipping and receiving, merchandise assortment planning, and departmental space planning. Additionally, the departments tend to be quite large, at times almost a store themselves. Whereas an employee working at a Best Buy or Circuit City could specialize in certain categories of electronics, a Walmart employee would have to be knowledgeable about all categories.
kamaal 13y ago
On the other hand, here in India- My neighbor has just come back from Dubai, after serving as a cashier at a major retail firm for almost 20 years. According him, surprisingly enough they make money while customers don't bother to collect change, or when the cashiers don't have change they just leave it at them. They keep a track of how much change has collected like that hourly or at half-day and then they pocket that. The company doesn't lose money anyway, the customers give away the change like tip. But in the process these guys make a lot of money. According to him, the money he makes through the change is actually way more than his actual salary, nearly like a multiple of his salary. And that is how he built much of his fortune back here in India.
mbesto 13y ago
Reminds me of the paradox of choice - http://en.wikipedia.org/wiki/The_Paradox_of_Choice:_Why_More_Is_Less http://en.wikipedia.org/wiki/The_Paradox_of_Choice:_Why_More...
LekkoscPiwa 13y ago
The minimal wage that is mostly what is paid in WalMart and is about $15,000 a year. Let's put it in historical perspective. In 1969 the minimal wage was $1.60. And in 1969 the price of ounce of silver was about $1.70. In other words 40 years ago the minimal wage in the USA was about $22 USD using today's silver price as an inflation indicator. Using 2013 data 22.00 USD is on par with average American hourly pay. This what was the minimal wage of 1969 became an average pay in 2013. So if you ever wonder why your grandad working single simple job could support his family with stay at home wife, 3 or 4 kids, have vacation house and literally no debt – that's why. The average pay is 3 times lower today than it was 40 years ago when the real money – gold and silver – are used as an indicator. Of course some will point out to believe that gold and silver prices are in the bubble territory and that's why my numbers don't make any sense. The problem with that reasoning is that gold is not experiencing bubble pricing. How do I know that? Because gold mining cost is at $1,200 with gold price merely covering it at $1,400. Bubbles are experienced in assets that sell by multiples of their real price, not the ones that are sold basically at the production cost. The staggering truth is that the current gold price simply reflects the high cost of living in the US today. The only correct conclusion seems to be that an average American worker is as poor today as minimal wage worker was 40 years ago. No wonder fast-food strikes set for cities nationwide: http://www.seattlepi.com/news/us/article/Fast-food-strikes-set-for-cities-nationwide-4770082.php http://www.seattlepi.com/news/us/article/Fast-food-strikes-s...
- maxerickson 13y ago
  You are missing the step where mining activity will frantically respond to the commodity price. That is, if gold were trading at $100 an ounce, no one would be working $1200 mines. The consumptive demand for gold could be met for some absurdly long time using the gold sitting in repositories, there is no actual need to produce it, it doesn't particularly have a production cost.
  - LekkoscPiwa 13y ago
    That's simple supply and demand. When supply weakens and the demand stays they same, the price goes up. So the price ends up higher because there are less producers but the same amount of people who want to buy gold. This what you describe creates shortages and shortages produce higher prices.
eloisant 13y ago
There is probably an other reason, the opposite of why Ford paid higher wages "so employees can afford his cars". Well, Wallmart employees are so poor they are forced to shop at Wallmart. If they got higher wages, they would probably shop at Trader's Joe or Wholefoods. By keeping poor people poor, they actually increase their customer base.
marincounty 13y ago
1. Costco dropped the "absolute satisfaction guarantee" on All of their products. 2. If you want to retun something; you need to talk with the Angry Manager. 3. Now this was fine and dandy with electronics, but it's a whole other story with grey market high end watches. 4. I try to pass this information along whenever I can. 5. I only use Costco for prescriptions. I try to use someone else's card to by toilet paper. 6. Costco used to be great, but they need smart senior management. I don't think you can take an angry employee, and increase revenue. I've just seen bad marketing decisions over the last decade.
- danielweber 13y ago
  The ease of returns in the retail world moves in waves. One store will make it easy, then all stores will make it easy, and then the stores will get swamped by the scammers who return goods they bought at other stores or goods they used and now are trying to return, and then retail stores will move against easy returns.
- woobar 13y ago
  1. Not true: We guarantee your satisfaction on every product we sell with a full refund. The following must be returned within 90 days of purchase for a refund: televisions, projectors, computers, cameras, camcorders, touch screen tablets, MP3 players and cellular phones. [1] 2. Not true. Regular folks at CS desk usually ask only one question: "Anything wrong with it?". You refund does not affected by the answer. 4. Don't spread FUD. [1] http://www.costco.com/membership-information.html http://www.costco.com/membership-information.html
netcan 13y ago
What a solid article. The number that caught my eye is Revenue/Total Employees. That brings home some realities of markets. Total revenue in the market is the amount consumers spend on groceries. Thats more or less constant. Wall Mart's low revenue/employee ($211k vs $620k) means they employ more people for every dollar of market share they have. This is an enormous difference. It implies that every time Costco win $1m in market share from Wal Mart, total employment drops by 3.1 people. Aldi (and its slightly upmarket cousin, Liddel) serve a similar market segment to Wal Mart in Europe. Is suspect they do it with even higher revenue per employee. These store are all about labour efficiency. This might be a "be careful what you wish for" scenario for retail workers and people concerned with wages at the lower rungs. Employers might be able to afford higher wages, but demand for those wages will go down. In that case, its hard to imagine wages really improving in the long term. Even if they did, total employment would be much lower and that would hit the lowest skill workers hardest. When you pay better wages, you can be choosier. This may be taking it a little far but.. I think what we see running through this scenario is an example of how improved efficiency breeds wage inequality.
- wffurr 13y ago
  That's true for all kinds of efficiency, including automation, which is near and dear to the hearts of Hacker News readers. The benefits of improved efficiency and automation, as you have pointed out, skip over employees. Some of them accrue to customers in the form of lower prices, but largely they accrue to management and shareholders in the form of increased profits. Costco appears to be the exception that proves the rule, here. In theory, efficiency and automation should be a net benefit to society, as we can then enjoy the same level of goods produced with less labor involved, but the uneven distribution of benefits causes lots of avoidable suffering on the part of laid-off workers. A guaranteed basic income for all (as opposed to means-tested benefits like welfare and the EITC) would fix a lot of that. It would remove the suffering from losing your job, and give investors an incentive to automate even more, as now you would have to pay people quite a bit to motivate them to accept low-skill menial jobs. We can fund such a basic income in part by dismantling the welfare state bureaucracy. No means testing makes distribution much simpler. The rest through higher taxes on income beyond the basic.
mncolinlee 13y ago
> Some stores cannot thrive unless they are within SHORT drives of many customers. My prediction is that within ten years, you will be able to tell the success of upmarket stores by the number of electric car chargers in front of them. The wealthy has always found ways to reduce their costs in ways that poorer people cannot easily duplicate, like reduced banking fees to draw their business.
vondur 13y ago
Except that WinCo has been expanding rapidly and directly competing against Wal-Mart. They also pay their employees more than Wal-Mart. They are only a grocery store, but they are competing. http://business.time.com/2013/08/07/meet-the-low-key-low-cost-grocery-chain-being-called-wal-marts-worst-nightmare/ http://business.time.com/2013/08/07/meet-the-low-key-low-cos...

249 points by georgecmu 13y ago

iopq 13y ago

that means they can afford to pay their workers around 3,000 more a year and their profit margins will the be the same as costco's

andrewflnr 13y ago

Um, where are the actual numbers of SKUs at Walmart and Costco? She implies they're in the graphic, but they're not. She mentions 108,000 SKUs at Walmart further down, but I have no idea what it is at Costco, except that it's less than 108,000.

orionblastar 13y ago

The article is Slashdotted, I cannot load it. Let me explain something. Walmart follows 'classical management' of negative reinforcement and cutting expenses down to the bone including salaries, benefits, and other stuff. They are willing to pay executives millions while letting most employees work for slave wages with little to no benefits to cut down on costs as much as possible. Costco follows 'participatory management' in which management gets involved with the employees and empowers them to make their own decisions. Executives are not paid millions and their salaries are based on how well the company does to encourage growth. Employees are paid more so they will be more productive and with good benefits to take care of health problems and family problems so they don't interfere with work. If the company is losing money, they do job cost analysis to see what products and services cost more to support than the revenue they bring in, and then quality is improved on those services and products and if it cannot then those products and services get cut instead of the people and new products and services replace them. Steve Jobs did this with Apple, cut out products and services that didn't bring in enough revenue to justify keeping them, cut his own salary as the iCEO, improved the quality of products and services or come up with new ones to replace them. Walmart and other 'classic management' companies just don't understand how to do that so they take it out on the employees instead.

xb95 13y ago
Wal-Mart has listed key executive compensation of around $63m USD this past year [http://insiders.morningstar.com/trading/executive-compensation.action?t=WMT http://insiders.morningstar.com/trading/executive-compensati...] and reported yearly revenue of $473,000m USD [http://finance.yahoo.com/q/ks?s=WMT http://finance.yahoo.com/q/ks?s=WMT]. I'd argue that spending 0.01% of revenue on key executive compensation (which is the 'paying executives millions' you talk about) is irrelevant to Wal-Mart overall and how much they can or can't pay their workers. Even if you stripped the executive compensation and gave it to the workers (2.2m of them), you'd only be handing out $30 to each person. That's a few hours of work total, and amortized over a year? Not a factor at all in the grand scheme of things. ... The article is well worth a read. It's interesting and insightful and discusses more interesting things like business models, target demographics, value-mindedness, etc. I recommend it if you can get it to load. (It was fine for me.)
- curveship 13y ago
  That's $63m to just the top 6 executives. Total executive compensation would be far far greater. And for comparison, Costco paid its top 6 only $19m, which I think is the GP's point: http://insiders.morningstar.com/trading/executive-compensation.action?t=COST http://insiders.morningstar.com/trading/executive-compensati... .
  - furtivefelon 13y ago
    I don't know, seems pretty reasonable, Costco revenue is 105B. Walmart has >4x revenue, and 19m*4=76m, more than Walmart. Based on your comparison, Walmart is paying their executives fairly.
    - yardie 13y ago
      About as reasonable as getting 9 women to make a baby in 1 month. This would only be true if those 6 executives were doing 4x the work of the executies at Costco. Conservatively, they might be doing 1.5x or even 2x the work. But I doubt they are putting in 160 hours a week.

tokenadult 13y ago

Having read the interesting article submitted here, I have to say that it is refreshing to see an analysis of different approaches to retailing that focuses not only on the demographic groups served by the different retailers, but also on the SKU (stock-keeping unit) count for each retailer. Having more different products in stock is more expensive than having fewer different products in stock. Carrying "name" brands is usually more expensive than carrying "store" brands. There are plenty of other differences between the shopping experience at Wal-Mart and Costco. A peculiarity of local geography is that we find that the two Costco stores at our end of the Twin Cities metropolitan area are just never on our way to anywhere else, so we let our Costco membership lapse after just one year. For quite the same reason, we hardly ever shop at Wal-Mart. But we shop at Sam's Club (the Wal-Mart version of a warehouse store like Costco) all the time, simply because it is on my way to work and largely on the way to many of our other trips during the week. Today we built a trip to Aldi into our schedule while our daughter was at soccer practice about halfway from our house to that store. We love to minimize driving--driving costs both money and time. Some stores cannot thrive unless they are within SHORT drives of many customers. Some of those stores have to extract a lot of productivity out of each worker to pay the workers even minimum wage. I still wonder when Amazon is going to go all-in in setting up major same-day delivery centers in most metropolitan areas in the United States. That could have a revolutionary influence on my shopping habits. And if robots can do more of the stocking of shelves, and eventually self-driving cars do most of the delivering, that business model could end up with huge market share. I'm very happy when workers at menial retail jobs are paid more--I have had such jobs (at Sears and at Target, many years ago). But they best gain opportunity to advance themselves economically when they also can save on their own consumer spending in retail stores. Everyone likes low prices day in and day out.

thetrb 13y ago
I'd love to have an Aldi in the Silicon Valley, at least if the concept is similar to the ones in Germany.
- billybob255 13y ago
  The ones in MI seem to be similar to the ones in Germany.

idunno246 13y ago

Walmart tried to move into a dilapidated mall in my neighborhood and everyone fought it and they couldnt. They moved a mile down the street to a slightly less wealthy neighborhood, in a dilapidated strip mall. Five years later, the strip mall with walmart is bustling with business and the other mall is still mostly empty. Wasted opportunity to get business into the township. Even though I generally wouldn't shop there, I have no issue with walmart, for exactly the reasons this author suggests I wouldn't

Afforess 13y ago
I agree. I tend to avoid Walmart due to its low quality on a lot of the store brand goods, but don't actually have any issues with how they run their business. They aren't exactly hiding that they are a low-cost retailer. If people have problems with the wages Walmart pays they should stop attacking Walmart and go deal with the people who actually set the minimum wages: your congress critter.
- cantankerous 13y ago
  For what it's worth, people do try that. Wal-Mart tends to show up and throw its weight around when this happens.
- Shivetya 13y ago
  Wal-Mart grocery sells many if not all the same name brands my local grocery stores do; Publix and Kroger for Atlanta metro. They just sell them so much cheaper I only buy at the others when I am lazy or there is a BOGO Going to any of my local Wal-Marts with grocery and it is the most crowded place of the store. While their clothing sections and miscellaneous house hold goods sections can be dodge the electronics section, automotive, and garden, sell many name brands I see elsewhere.
nsxwolf 13y ago
What you say cannot possibly be true. I have been told time and time again that the arrival of a Walmart always spells doom for adjacent businesses, and the people who told me that seemed very sure about themselves.

bsbechtel 13y ago

I'd be interested in seeing how the distribution of pay for all employees, through a Gini coefficient or other means, stacks up for Walmart vs Costco.

RandyH 13y ago

Is this pretty much the market speaking and saying that Wal-Mart has a crumby business? Especially factoring in that a lot of people couldn't even work there without government subsidies in the form of food stamps, etc. http://www.motherjones.com/mojo/2013/06/report-walmart-forces-employees-dole-taxpayers http://www.motherjones.com/mojo/2013/06/report-walmart-force...

twoodfin 13y ago
I don't get this "subsidy" argument. Bob pays $200 for his rent, and $150 for groceries. He applied for a job at Costco and was turned down, but Walmart offered him a job so he took it. Without government benefits, he couldn't afford his rent and he couldn't afford his groceries. Without his job at Walmart, he'd be eligible for even more benefits. But somehow it's Walmart that's being subsidized, and not his grocer or his landlord? Not to mention Costco, who's paying him $0, while Walmart pays him something, at least.
- iopq 13y ago
  if not for government programs, nobody would work at Walmart they would literally not be able to afford to work there, so they wouldn't even accept the job if offered because it wouldn't pay their expenses since the opportunity cost would be too great a few retirees or people living with parents would work there, but not enough to fill out their work force this is because wages for unskilled labor tend to approach the minimum you have to pay for people to live and since the government is footing the bill to reduce that minimum to very little, Walmart can get away with paying very little if government decided to take away all benefits for people currently employed, Walmart would have to raise their wages because the workers would quit in droves to sit on welfare instead
  - yummyfajitas 13y ago
    if not for government programs, nobody would work at Walmart...they wouldn't even accept the job if offered...opportunity cost would be too great Could you explain, ideally by using numbers (either real or example) to illustrate your argument? Something along the lines of: No government subsidies, no job at walmart: earnings + unearned income = $x No govt subsidies, job at walmart: earnings + unearned income = $y etc.

SeanLuke 13y ago

Through ambiguous verbage, this author very carefully skirts an unfortunate fact which ruins his argument. And that is: Trader Joe's has a very high number of employees per square foot. TJs is swarming with employees. They're trained to do every task and can fill in for one another. My local TJs, a microscopic one and the smallest in DC by far, usually has over 15 employees, often 20, day and night. I know: I counted them. I think that this guy is saying that Wal-Mart can't do what Costco does because it has more SKUs and thus a higher density of employees. But TJ's density is much higher still, and it pays like Costco does.

cpleppert 13y ago
>>I think that this guy is saying that Wal-Mart can't do what Costco does because it has more SKUs and thus a higher density of employees. But TJ's density is much higher still, and it pays like Costco does. It isn't the density per se, it is the density of a a much larger store that doesn't have the margins that trader joes has. They are two fundamentally different business models. Retails stores targeted at upscale consumers can afford to spend on salaries to give the service that their customers want. Wal-Mart needs low prices and lots of products to satisfy theirs.
sseveran 13y ago
He is saying its a fundamentally different business. A higher number of SKUs necessitates a much larger space and lower per employee productivity. A Trader Joes customer is willing to pay for customer service and a Walmart customer is not. As a society we may say well thats an unacceptable attitude on the part of Walmart's customers and then put them out of business. But at the end of the day its not like Walmart's executives would be the ones picking up the tab, its the customers.
enoch_r 13y ago
The (female) author's point isn't that "Wal-Mart can't do what Costco does because it has more SKUs and thus a higher density of employees." It's that Wal-Mart, Costco, and TJ's have so many differences on so many axes that it is quite silly to make naive comparisons between their level of employee compensation while ignoring everything else that makes them different. I find this example particularly baffling, as one visit to TJ's should be all one needs to recognize that it's not even in the same category as a store like Wal-Mart.

deleted 13y ago

[deleted]

coin 13y ago

"The average American cashier makes $20,230 a year, a salary that in a single-earner household would leave a family of four living under the poverty line." 20k is on the low side, but one should still consider their own income before having children, especially two.

artsrc 13y ago
I don't want a world where people consider their own income before having children and find that they can't afford to have children and not live in poverty, and have to miss out on having children.
- res0nat0r 13y ago
  From the opposite end of the spectrum: If everyone could have as many children as they wanted regardless of any outside consequences, wouldn't that be just as harmful or not more?
- tomjen3 13y ago
  Restrutoring your argument: >I don't want a world where people consider their own income before going on a trip around the world _and_ find that they can't afford to take a trip around the world and not live in poverty, and have to miss out on traveling the world. Everything, including children, are a cost. Is it not better that people look at the cost before, rather than after, they make a purchase? Especialy with something as important as a childs wellbeing. Anyway it takes a lot less money to raise a family than you might think it does. My grandparents raised my mother on next to nothing, my parents raised me on very little initially.
dylangs1030 13y ago
They should...but if everyone did that we'd have much less population growth. Most people, particularly lower classes, don't particularly care. I don't have a citation, but it's kind of self-evident. At the very least, people don't expect a family to cost so much, and think if they're prepared for it beforehand they'll be fine. You can't be prepared for poverty with a family.
13y ago

jusben1369 13y ago

I don't think I missed it but I am confused why the author steered clear of some really interesting data. Based on the table Walmart has 2X the profit margin of Costco. Walmart's doing around 4.5x topline revenue but over 9x the total profit amount. For the author's central point to hold true those numbers need to be more closely aligned. That is, they need to be roughly the same in % terms. They aren't, which means one or both of the players are doing something substantially different in their approach. Given that labor costs are the single largest expense for these types of business it's not unreasonable to reach the conclusion of those she's rebutting with this article. Namely that Walmart is overly maximizing profits based on the back of paying extremely low wages. To put it another way, if for some reason Walmart was told to bring it's margins in line with Costco the easiest way to do that would be to bring your wages up and keep your prices the same. Let's do back of the envelope math based on the chart in the article. If Walmart had the margins of Costco rather than the current ones that would see it's profit dip from $15.6 billion to $7.53 billon. That in turn would "free up" $8 billion in what is now pure profit. With 2 million global employees you could pay them all $4K more. That's a 20% salary increase for the basic salary they highlighted of $20K per year. I'm not bashing Walmart. I'm just pointing out that Costco seems to have made the decision to have meaningfully smaller margins than Walmart. Given where the bulk of their costs lie they must have had the conversation more than once about paying folks less to move those margins up to please Wall Street more. Yet they have decided not to do that. Perhaps it's simply because they believe the business benefit around being easier for them to be accepted in new communities (and thus grow) based on the real and perceived perception that they treat their workers well. PS: Anecdotally Walmart opened near us two months ago. I have now been there 4 or 5 times. I am struck by just how many people there are working there on the floor. There seem to be too many whenever I'm there. They look bored and so congregate in groups and shoot the breeze. I couldn't get that out of my mind as the author kept stressing they really need a lot more employees.

dylangs1030 13y ago
I used to work in a supermarket and in a department store. Those people you see shooting the shit and slacking off are necessary. The reason why they're there is because if the store suddenly gets packed, they will be split up and given tasks. They're insurance. You can't not have them there, or you'll get customer complaints when they can't find someone to help them, there's too few lanes, etc. And that's just during the day in front-end customer facing situations. They're constantly called back to inventory to do warehouse-type jobs, even if they're cashiers.

onoj 13y ago

I have heard of this journalist before. Apart from the absolute lack of an explanation as to WHY Walmart cannot pay higher wages (spoiler - it's complicated!) also, I find the link in the S.H.A.M.E. project of interest. http://shameproject.com/profile/megan-mcardle/ http://shameproject.com/profile/megan-mcardle/

jusben1369 13y ago
Meh. Either her content is substantially right or it's substantially wrong. Let's just debunk her theories if we don't believe her vs personally attacking her. This "She's a conservative activist from the heart of Koch!" is no different (or less offensive) than "She's a bleeding heart liberal from Berkeley!"
- gchpaco 13y ago
  I have a limited amount of time in my life and no wish to spend it playing "spot the logical fallacy in every paragraph" with McArdle. I have found it more efficient to learn that she is a feckless human being who will lie (by omission and otherwise) and entirely ignore her than teasing out the truth in her writings, which would require reading in detail the primary sources she is allegedly summarizing as well as the ones she silently omits. Calling ad hominem is well and good and something to keep in the back of your mind, but I tend to agree with Daniel Davies that "giving known liars the benefit of the doubt" is more likely to steer you wrong.
- onoj 13y ago
  There was a lot of content, but the premise of the article - that it would explain why Walmart paid less than Costco, was missing. From that I wondered if the article itself was just some form of PR or politically motivated rather than unbiased journalism.
- crdoconnor 13y ago
  >Meh. Either her content is substantially right or it's substantially wrong. Let's just debunk her theories Let's also get some context about where these theories are coming from. If people understood why people like her are shills and who they're shills for they might be a little more skeptical.

jpitz 13y ago

The size of the SKU assortment has such a profound impact on so very many areas of the business, I would venture to say that if two retailers don't have a comparably sized SKU assortment, they're well-nigh incomparable.

CleanedStar 13y ago

>lower income households cant afford to pay extra for top-notch service...several people will e-mail, or tweet, or come into the comments to say theyd be happy to pay 25 percent more for their Big Mac or their Wal-Mart goods...However, there are people for whom the McDonald's Dollar Menu is a bit of a splurge, and Wal-Marts prices mean an extra pair of shoes for the kids. Those people might theoretically favor high wages, but they do not act on those beliefs... I dont know how much more they could afford to pay before they started to lose customers Higher in the piece, she includes an infographic which says Wal-Mart makes $7,428 profit for every employee it has. It also says Wal-Mart has a profit margin of 3.5% to Costco's 1.7%. It seems that the only method that occurs to her where the workers can get higher wages is by raising prices. Let us consider Christy Walton, who is worth over $27 billion. She is worth $27 billion because the son of Sam Walton used to plow her pussy. Since an heir blew his load into her hole, she collects a sizable portion of the $6 billion a year Wal-Mart sends out in dividends. She's a parasite. She is a receptacle for the jism of an heir. Workers bust their ass at Wal-Mart all day, and create wealth. She laid on her back for an heir, so she gets to parasitically expropriate the surplus labor value of the workers creating wealth at Wal-Mart. They work but don't get paid - the dividends from the hours they work, the wealth they create are sent to her. She is as useless as the Romanovs were in the moments before the bullets from a Bolshevik firing squad tore them to shreds. She has no connection to production except as a leech, no connection to the workers creating wealth and stocking Wal-Mart shelves except as a parasite. THIS is reality. There is all kinds of bullshit, all kinds of nicey-nice little Goebbels commissar intellectual whore lackeys like McArdle around, scribbling for their pay and their masters why the parasites like Christy Walton should live so well, and why those doing all the work should be paid so little. While they would like to blot out people's remembrance of history, two centuries ago, capitalist's had almost no power. Their champion, Napoleon, was about to be exiled to Saint Helena as the Bourbon Restoration took hold, and the last vestige of capitalist power on continental Europe was about to be stamped out. By the time several decades later capitalists became coming into power, they were almost immediately hit with the Paris Commune, and then the October Revolution. Every power always tries to make it sound as if they have the Blessing of God, that they were around forever, will be around forever, are all powerful etc. The fact is that the powers that be having to write out screeds on how Wal-Mart workers should be paid less is a sign of a degenerating system. In the early 1960s, American intellectuals, writers etc. had a brighter idea of the future. They wanted to improve STEM in schools, fund things like the MIT AI lab and SAIL, catch up and beat the Union of Soviet Socialist Republics in the Space Race etc. Now they spent their time propounding how they can't make it any more, and have to shake the last pennies out of Wal-Mart workers pockets because they don't know how to make sustainable profits any more. And one of their biggest problems according to former GE CEO Jack Welch is overproduction/underconsumption. Yet their solution is to strip consumers of dollars, and send it to these heirs, who then have nowhere to invest in. It's an inherent contradiction within the economic system, just like feudalism and slavery and hunter-gather societies all had their own internal contradictions which ultimately destroyed them and led to new forms of production.

MikeCapone 13y ago

A lot of what I knew about Walmart came from third party sources (activists, whatever), so I decided to go to a primary and read Sam Walton's book, and I must say it gave me a new appreciation and understanding for the vast machine that is Walmart. I highly recommend it: http://www.amazon.com/Sam-Walton-Made-In-America/dp/0553562835 http://www.amazon.com/Sam-Walton-Made-In-America/dp/05535628...

philwelch 13y ago
Sam Walton has been dead for decades now, and many of his ideas (giving stock to employees, even store workers) made more sense for the early growth stages he oversaw than the company that exists today.
- MikeCapone 13y ago
  Indeed. Not sure what that has to do with what I wrote. The history of Walmart is still the same, and that's what I found so interesting.
  - philwelch 13y ago
    The history of Wal-Mart during Sam Walton's life is decades removed from the company's business practices today.
    - MikeCapone 13y ago
      True, but I never said it was a book about today's Walmart, just that I found it interesting to learn about that company's history and that I recommend the book.
      - MikeCapone 13y ago
        To which I'll add: the past helps better understand the present...

zwieback 13y ago

Well written article, enjoyed it although I also noticed the much-higher margin Walmart has. It's very obvious that Walmart allows less wealthy people to buy more. Paradoxically, the very people suffering from stagnant blue-collar wages are Walmart's customers.

deleted 13y ago

[deleted]

ebbv 13y ago

As she links in the post, she wrote basically this same article almost a year ago. Why are we rehashing it?

vbnmvbn 13y ago

SERIAL NARCOTRAFICANT POLITICS. ENGLAND QUEEN & HARPER – GENOCIDAL PROTECTOR. MOSANTO EARNING MONEY FOR NANO COMUTERS SELL IN FDA UN INVESTIGATED FOOD. DO YOU KNOW WHAT IS ATOMIC FORCE MICROSCOPY???????. EUROPEAN (ROB) THE SATELITAL TERRORIST DIRECTOR. DO YOU KNOW THEY ARE SEEING THIS TEXTS AND DENOUNCES UNTIL 2000. WE DEMAND 1.000.000 DOLARS PER EACH DAMAGED TELOMER. http://www.pgiorg.blog.com http://www.pgiorg.blog.com SERIAL NARCOTRAFICANT POLITICS. ENGLAND QUEEN & HARPER – GENOCIDAL PROTECTOR. MOSANTO EARNING MONEY FOR NANO COMUTERS SELL IN FDA UN INVESTIGATED FOOD. DO YOU KNOW WHAT IS ATOMIC FORCE MICROSCOPY???????. EUROPEAN (ROB) THE SATELITAL TERRORIST DIRECTOR. DO YOU KNOW THEY ARE SEEING THIS TEXTS AND DENOUNCES UNTIL 2000. WE DEMAND 1.000.000 DOLARS PER EACH DAMAGED TELOMER. http://www.pgiorg.blog.com http://www.pgiorg.blog.com SERIAL NARCOTRAFICANT POLITICS. ENGLAND QUEEN & HARPER – GENOCIDAL PROTECTOR. MOSANTO EARNING MONEY FOR NANO COMUTERS SELL IN FDA UN INVESTIGATED FOOD. DO YOU KNOW WHAT IS ATOMIC FORCE MICROSCOPY???????. EUROPEAN (ROB) THE SATELITAL TERRORIST DIRECTOR. DO YOU KNOW THEY ARE SEEING THIS TEXTS AND DENOUNCES UNTIL 2000. WE DEMAND 1.000.000 DOLARS PER EACH DAMAGED TELOMER. http://www.pgiorg.blog.com http://www.pgiorg.blog.com SERIAL NARCOTRAFICANT POLITICS. ENGLAND QUEEN & HARPER – GENOCIDAL PROTECTOR. MOSANTO EARNING MONEY FOR NANO COMUTERS SELL IN FDA UN INVESTIGATED FOOD. DO YOU KNOW WHAT IS ATOMIC FORCE MICROSCOPY???????. EUROPEAN (ROB) THE SATELITAL TERRORIST DIRECTOR. DO YOU KNOW THEY ARE SEEING THIS TEXTS AND DENOUNCES UNTIL 2000. WE DEMAND 1.000.000 DOLARS PER EACH DAMAGED TELOMER. http://www.pgiorg.blog.com http://www.pgiorg.blog.com SERIAL NARCOTRAFICANT POLITICS. ENGLAND QUEEN & HARPER – GENOCIDAL PROTECTOR. MOSANTO EARNING MONEY FOR NANO COMUTERS SELL IN FDA UN INVESTIGATED FOOD. DO YOU KNOW WHAT IS ATOMIC FORCE MICROSCOPY???????. EUROPEAN (ROB) THE SATELITAL TERRORIST DIRECTOR. DO YOU KNOW THEY ARE SEEING THIS TEXTS AND DENOUNCES UNTIL 2000. WE DEMAND 1.000.000 DOLARS PER EACH DAMAGED TELOMER. http://www.pgiorg.blog.com http://www.pgiorg.blog.com SERIAL NARCOTRAFICANT POLITICS. ENGLAND QUEEN & HARPER – GENOCIDAL PROTECTOR. MOSANTO EARNING MONEY FOR NANO COMUTERS SELL IN FDA UN INVESTIGATED FOOD. DO YOU KNOW WHAT IS ATOMIC FORCE MICROSCOPY???????. EUROPEAN (ROB) THE SATELITAL TERRORIST DIRECTOR. DO YOU KNOW THEY ARE SEEING THIS TEXTS AND DENOUNCES UNTIL 2000. WE DEMAND 1.000.000 DOLARS PER EACH DAMAGED TELOMER. http://www.pgiorg.blog.com http://www.pgiorg.blog.com SERIAL NARCOTRAFICANT POLITICS. ENGLAND QUEEN & HARPER – GENOCIDAL PROTECTOR. MOSANTO EARNING MONEY FOR NANO COMUTERS SELL IN FDA UN INVESTIGATED FOOD. DO YOU KNOW WHAT IS ATOMIC FORCE MICROSCOPY???????. EUROPEAN (ROB) THE SATELITAL TERRORIST DIRECTOR. DO YOU KNOW THEY ARE SEEING THIS TEXTS AND DENOUNCES UNTIL 2000. WE DEMAND 1.000.000 DOLARS PER EACH DAMAGED TELOMER. http://www.pgiorg.blog.com http://www.pgiorg.blog.com SERIAL NARCOTRAFICANT POLITICS. ENGLAND QUEEN & HARPER – GENOCIDAL PROTECTOR. MOSANTO EARNING MONEY FOR NANO COMUTERS SELL IN FDA UN INVESTIGATED FOOD. DO YOU KNOW WHAT IS ATOMIC FORCE MICROSCOPY???????. EUROPEAN (ROB) THE SATELITAL TERRORIST DIRECTOR. DO YOU KNOW THEY ARE SEEING THIS TEXTS AND DENOUNCES UNTIL 2000. WE DEMAND 1.000.000 DOLARS PER EACH DAMAGED TELOMER. http://www.pgiorg.blog.com http://www.pgiorg.blog.com SERIAL NARCOTRAFICANT POLITICS. ENGLAND QUEEN & HARPER – GENOCIDAL PROTECTOR. MOSANTO EARNING MONEY FOR NANO COMUTERS SELL IN FDA UN INVESTIGATED FOOD. DO YOU KNOW WHAT IS ATOMIC FORCE MICROSCOPY???????. EUROPEAN (ROB) THE SATELITAL TERRORIST DIRECTOR. DO YOU KNOW THEY ARE SEEING THIS TEXTS AND DENOUNCES UNTIL 2000. WE DEMAND 1.000.000 DOLARS PER EACH DAMAGED TELOMER. http://www.pgiorg.blog.com http://www.pgiorg.blog.com SERIAL NARCOTRAFICANT POLITICS. ENGLAND QUEEN & HARPER – GENOCIDAL PROTECTOR. MOSANTO EARNING MONEY FOR NANO COMUTERS SELL IN FDA UN INVESTIGATED FOOD. DO YOU KNOW WHAT IS ATOMIC FORCE MICROSCOPY???????. EUROPEAN (ROB) THE SATELITAL TERRORIST DIRECTOR. DO YOU KNOW THEY ARE SEEING THIS TEXTS AND DENOUNCES UNTIL 2000. WE DEMAND 1.000.000 DOLARS PER EACH DAMAGED TELOMER. http://www.pgiorg.blog.com http://www.pgiorg.blog.com SERIAL NARCOTRAFICANT POLITICS. ENGLAND QUEEN & HARPER – GENOCIDAL PROTECTOR. MOSANTO EARNING MONEY FOR NANO COMUTERS SELL IN FDA UN INVESTIGATED FOOD. DO YOU KNOW WHAT IS ATOMIC FORCE MICROSCOPY???????. EUROPEAN (ROB) THE SATELITAL TERRORIST DIRECTOR. DO YOU KNOW THEY ARE SEEING THIS TEXTS AND DENOUNCES UNTIL 2000. WE DEMAND 1.000.000 DOLARS PER EACH DAMAGED TELOMER. http://www.pgiorg.blog.com http://www.pgiorg.blog.com SERIAL NARCOTRAFICANT POLITICS. ENGLAND QUEEN & HARPER – GENOCIDAL PROTECTOR. MOSANTO EARNING MONEY FOR NANO COMUTERS SELL IN FDA UN INVESTIGATED FOOD. DO YOU KNOW WHAT IS ATOMIC FORCE MICROSCOPY???????. EUROPEAN (ROB) THE SATELITAL TERRORIST DIRECTOR. DO YOU KNOW THEY ARE SEEING THIS TEXTS AND DENOUNCES UNTIL 2000. WE DEMAND 1.000.000 DOLARS PER EACH DAMAGED TELOMER. http://www.pgiorg.blog.com http://www.pgiorg.blog.com SERIAL NARCOTRAFICANT POLITICS. ENGLAND QUEEN & HARPER – GENOCIDAL PROTECTOR. MOSANTO EARNING MONEY FOR NANO COMUTERS SELL IN FDA UN INVESTIGATED FOOD. DO YOU KNOW WHAT IS ATOMIC FORCE MICROSCOPY???????. EUROPEAN (ROB) THE SATELITAL TERRORIST DIRECTOR. DO YOU KNOW THEY ARE SEEING THIS TEXTS AND DENOUNCES UNTIL 2000. WE DEMAND 1.000.000 DOLARS PER EACH DAMAGED TELOMER. http://www.pgiorg.blog.com http://www.pgiorg.blog.com

tonydiv 13y ago

For those interested in learning more about Costco, this is the most informative, fascinating, and mind-blowing report I have ever read: Understanding Costco by Coriolis Research (namely, Tim Morris). http://www.coriolisresearch.com/pdfs/coriolis_understanding_Costco.pdf http://www.coriolisresearch.com/pdfs/coriolis_understanding_... Some mind blowing facts: 1. They pay their employees $10-$17/hr as opposed to Walmart (as discussed in the article) 2. CEO earned 350k in 2012, only twice that of a store manager at Costco 3. Margins are razor thin. In fact, an employee got yelled at for selling something at a higher margin (even though all the products were successfully sold within a week) 4. ~40% of Californians have a membership 5. 30% of inventory is at the store within 8 hours *Note: My employer is a consultant for Costco, and I might be too, so I'm definitely bias, but I love the company.

scottjad 13y ago
CEO earnings are generally much more extensive than just the salary (I'm not judging, just saying). This link seems to indicate that the compensation was maybe $4.8 million (basic compensation fiscal year 2012) to over $10 million (options, WARNING I'm not sure how to read these so just addding all of them together) http://www.reuters.com/finance/stocks/officerProfile?symbol=COST.O&officerId=64972 http://www.reuters.com/finance/stocks/officerProfile?symbol=...
nitid_name 13y ago
> 3. Margins are razor thin. I seem to recall reading their markup is <17%, no more than one part in six.
- tonydiv 13y ago
  Costco's gross margin: 12.5% Safeway's gross margin: 29.6% Costco's ROIC: 17.8% Safeway's ROIC: 4.9%

cantankerous 13y ago

Wal-Mart’s customers expect a very broad array of goods, because they’re a department store, not a specialty retailer; lots of people rely on Wal-Mart for their regular weekly shopping. The retailer has tried to cut the number of SKUs it carries, but ended up having to put them back, because it cost them in complaints, and sales. That means more labor, and lower profits per square foot. It also means that when you ask a clerk where something is, he’s likely to have no idea, because no person could master 108,000 SKUs. Having done a few years time in retail, I find this part a bit telling. I'm curious if the author has ever worked in a department store? Many department stores assign various employees to ....departments in the store. The actual SKU count you need to mentally juggle in your head is a fraction of what the entire store carries. Increasing the number of employees in a department and paying them better should give you a better knowledge on the floor of where something is if only because customers can find a department member. In my Wal-Mart it seems like you'd be lucky to find a department member in any particular department, except maybe automotive or electronics. Economic realities notwithstanding about where the money comes from to hire more employees or pay them more of course.

tanzam75 13y ago
She uses the term "department store" incorrectly. She means "hypermarket," where groceries are sold alongside general merchandise.
- cantankerous 13y ago
  Perhaps so, but still. Wal-Mart segments its departments like a department store would. Groceries are usually on one side of the store. Outdoor and auto are usually in a corner near each other. Electronics is its own thing. Home Improvement, Pet, Beauty, Pharma, Household, Crafts...they're all segmented by where their assigned shelf-space is. Each one has folks that are in some way assigned to it. This is my point.
  - Zikes 13y ago
    Segmentation at the end point doesn't necessarily mean that those 100,000+ SKUs under one roof isn't a lot. There are many places in the retail operations process where it's still a very big deal, including shipping and receiving, merchandise assortment planning, and departmental space planning. Additionally, the departments tend to be quite large, at times almost a store themselves. Whereas an employee working at a Best Buy or Circuit City could specialize in certain categories of electronics, a Walmart employee would have to be knowledgeable about all categories.

kamaal 13y ago

On the other hand, here in India- My neighbor has just come back from Dubai, after serving as a cashier at a major retail firm for almost 20 years. According him, surprisingly enough they make money while customers don't bother to collect change, or when the cashiers don't have change they just leave it at them. They keep a track of how much change has collected like that hourly or at half-day and then they pocket that. The company doesn't lose money anyway, the customers give away the change like tip. But in the process these guys make a lot of money. According to him, the money he makes through the change is actually way more than his actual salary, nearly like a multiple of his salary. And that is how he built much of his fortune back here in India.

mbesto 13y ago

Reminds me of the paradox of choice - http://en.wikipedia.org/wiki/The_Paradox_of_Choice:_Why_More_Is_Less http://en.wikipedia.org/wiki/The_Paradox_of_Choice:_Why_More...

LekkoscPiwa 13y ago

The minimal wage that is mostly what is paid in WalMart and is about $15,000 a year. Let's put it in historical perspective. In 1969 the minimal wage was $1.60. And in 1969 the price of ounce of silver was about $1.70. In other words 40 years ago the minimal wage in the USA was about $22 USD using today's silver price as an inflation indicator. Using 2013 data 22.00 USD is on par with average American hourly pay. This what was the minimal wage of 1969 became an average pay in 2013. So if you ever wonder why your grandad working single simple job could support his family with stay at home wife, 3 or 4 kids, have vacation house and literally no debt – that's why. The average pay is 3 times lower today than it was 40 years ago when the real money – gold and silver – are used as an indicator. Of course some will point out to believe that gold and silver prices are in the bubble territory and that's why my numbers don't make any sense. The problem with that reasoning is that gold is not experiencing bubble pricing. How do I know that? Because gold mining cost is at $1,200 with gold price merely covering it at $1,400. Bubbles are experienced in assets that sell by multiples of their real price, not the ones that are sold basically at the production cost. The staggering truth is that the current gold price simply reflects the high cost of living in the US today. The only correct conclusion seems to be that an average American worker is as poor today as minimal wage worker was 40 years ago. No wonder fast-food strikes set for cities nationwide: http://www.seattlepi.com/news/us/article/Fast-food-strikes-set-for-cities-nationwide-4770082.php http://www.seattlepi.com/news/us/article/Fast-food-strikes-s...

maxerickson 13y ago
You are missing the step where mining activity will frantically respond to the commodity price. That is, if gold were trading at $100 an ounce, no one would be working $1200 mines. The consumptive demand for gold could be met for some absurdly long time using the gold sitting in repositories, there is no actual need to produce it, it doesn't particularly have a production cost.
- LekkoscPiwa 13y ago
  That's simple supply and demand. When supply weakens and the demand stays they same, the price goes up. So the price ends up higher because there are less producers but the same amount of people who want to buy gold. This what you describe creates shortages and shortages produce higher prices.

eloisant 13y ago

There is probably an other reason, the opposite of why Ford paid higher wages "so employees can afford his cars". Well, Wallmart employees are so poor they are forced to shop at Wallmart. If they got higher wages, they would probably shop at Trader's Joe or Wholefoods. By keeping poor people poor, they actually increase their customer base.

marincounty 13y ago

1. Costco dropped the "absolute satisfaction guarantee" on All of their products. 2. If you want to retun something; you need to talk with the Angry Manager. 3. Now this was fine and dandy with electronics, but it's a whole other story with grey market high end watches. 4. I try to pass this information along whenever I can. 5. I only use Costco for prescriptions. I try to use someone else's card to by toilet paper. 6. Costco used to be great, but they need smart senior management. I don't think you can take an angry employee, and increase revenue. I've just seen bad marketing decisions over the last decade.

danielweber 13y ago
The ease of returns in the retail world moves in waves. One store will make it easy, then all stores will make it easy, and then the stores will get swamped by the scammers who return goods they bought at other stores or goods they used and now are trying to return, and then retail stores will move against easy returns.
woobar 13y ago
1. Not true: We guarantee your satisfaction on every product we sell with a full refund. The following must be returned within 90 days of purchase for a refund: televisions, projectors, computers, cameras, camcorders, touch screen tablets, MP3 players and cellular phones. [1] 2. Not true. Regular folks at CS desk usually ask only one question: "Anything wrong with it?". You refund does not affected by the answer. 4. Don't spread FUD. [1] http://www.costco.com/membership-information.html http://www.costco.com/membership-information.html

netcan 13y ago

What a solid article. The number that caught my eye is Revenue/Total Employees. That brings home some realities of markets. Total revenue in the market is the amount consumers spend on groceries. Thats more or less constant. Wall Mart's low revenue/employee ($211k vs $620k) means they employ more people for every dollar of market share they have. This is an enormous difference. It implies that every time Costco win $1m in market share from Wal Mart, total employment drops by 3.1 people. Aldi (and its slightly upmarket cousin, Liddel) serve a similar market segment to Wal Mart in Europe. Is suspect they do it with even higher revenue per employee. These store are all about labour efficiency. This might be a "be careful what you wish for" scenario for retail workers and people concerned with wages at the lower rungs. Employers might be able to afford higher wages, but demand for those wages will go down. In that case, its hard to imagine wages really improving in the long term. Even if they did, total employment would be much lower and that would hit the lowest skill workers hardest. When you pay better wages, you can be choosier. This may be taking it a little far but.. I think what we see running through this scenario is an example of how improved efficiency breeds wage inequality.

wffurr 13y ago
That's true for all kinds of efficiency, including automation, which is near and dear to the hearts of Hacker News readers. The benefits of improved efficiency and automation, as you have pointed out, skip over employees. Some of them accrue to customers in the form of lower prices, but largely they accrue to management and shareholders in the form of increased profits. Costco appears to be the exception that proves the rule, here. In theory, efficiency and automation should be a net benefit to society, as we can then enjoy the same level of goods produced with less labor involved, but the uneven distribution of benefits causes lots of avoidable suffering on the part of laid-off workers. A guaranteed basic income for all (as opposed to means-tested benefits like welfare and the EITC) would fix a lot of that. It would remove the suffering from losing your job, and give investors an incentive to automate even more, as now you would have to pay people quite a bit to motivate them to accept low-skill menial jobs. We can fund such a basic income in part by dismantling the welfare state bureaucracy. No means testing makes distribution much simpler. The rest through higher taxes on income beyond the basic.

mncolinlee 13y ago

> Some stores cannot thrive unless they are within SHORT drives of many customers. My prediction is that within ten years, you will be able to tell the success of upmarket stores by the number of electric car chargers in front of them. The wealthy has always found ways to reduce their costs in ways that poorer people cannot easily duplicate, like reduced banking fees to draw their business.

vondur 13y ago

Except that WinCo has been expanding rapidly and directly competing against Wal-Mart. They also pay their employees more than Wal-Mart. They are only a grocery store, but they are competing. http://business.time.com/2013/08/07/meet-the-low-key-low-cost-grocery-chain-being-called-wal-marts-worst-nightmare/ http://business.time.com/2013/08/07/meet-the-low-key-low-cos...