Walmart Pays Workers Poorly and Sinks While Costco Pays Workers Well and Sails-Proof That You Get What You Pay for 9/5/14, 10:00 AM

Walmart Pays Workers Poorly And Sinks While Costco Pays Workers Well And Sails-Proof That You Get What You Pay For 9/5/14, 10:00 AM

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OPINION (/OPINION) 4/17/2013 @ 10:49AM 273,285 views Walmart Pays Workers Poorly And Sinks While Costco Pays

Rick Ungar Workers Well And Sails-Proof That (http://www.forbes.com/sites/rickungar/) Contributor You Get What You Pay For FOLLOW Comment Now Follow Comments I write from the left on politics and policy. Costco’s most recent Safari Power Saver full bio → quarterly earnings report Click to Start Flash Plug-in Opinions expressed by Forbes (http://phx.corporate- Contributors are their own. ir.net/phoenix.zhtml? (http://twitter.com/rickungar)(http://www.facebook.com/richard.ungar)(http://www.forbes.com/sites/rickungar/feed/)(http://www.forbes.com/sites/rickungar/)c=83830&p=irol- A protest in Utah against Wal- Mart (Photo credit: Wikipedia)

newsArticle&ID=1794682&highlight=) reveals a fairly healthy eight percent rate of growth in year-on-year 431 sales—including a five percent rise in same store sales. COMMENTS What’s more, with membership fees rising from $459 million in the same quarter last year to $528 million this year, it’s pretty clear that a significant number of 64 CALLED-OUT customers are moving over to the retailer to do their

Follow Comments discount shopping.

Meanwhile, Costco’s primary competitor, Walmart, saw an anemic 1.2 percent rise in sales, while other competitors such as J.C. Penny and Target (/companies/target/) TGT -0.66% (/companies/target/) experienced even greater disasters in their sales results.

In an identical economy, how do we explain Costco’s growth vis-à-vis the failures over at Walmart?

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Here’s a crazy thought—might it have something to do with the fact that Costco pays nearly all of its employees a decent living (well in excess of the minimum wage) while Wal-Mart continues to pay its workers as if their employees don’t actually need to eat more than once a week, live in an enclosed space and, on occasion, take their kids to see a doctor?

CenturyLinkVoice: And just in case the occasional Walmart employee finds a way to squeak by, Think Global, Act Local: Fortify Your the company has sought to put an end to that by cutting their employment Data Center Strategy (http://www.forbes.com/sites/centurylink/2014/08/27/think-roster by 1.4 percent, even as they increased their store count by thirteen global-act-local- percent. fortify-your-data- center-strategy/? sr_source=lift_polar) The result? David Meredith CenturyLink (http://blogs.forbes.com/people/dmeredithcl/)Walmart service now pretty much sucks—and customers don’t like it. FREE Without enough employees to get the basic work of a SHIPPING retail operation done—and with those on site being on $50+ paid a wage so low that it is difficult to expect much in the way of pride or motivation—Wal-Mart

merchandise remains stacked on pallets in the SHOP NOW warehouse rather than making it to the floor where customers can find the products they want. At the same time, check-out lines are painfully long and annoying as the overall shopping experience continues to deteriorate.

One is left to wonder about the value of offering products at a lower price if those products are not on the shelves when the customer needs to buy them?

Per Bloomberg Businessweek (http://www.businessweek.com/articles/2013- 03-28/walmart-faces-the-cost-of-cost-cutting-empty-shelves): Walmart Bails On Obamacare-Sticks “Wal-Mart Stores (/companies/wal-mart-stores/) WMT +0.5% (/companies/wal-mart-stores/) Taxpayers With Employee Healthcare (WMT Costs (http://www.forbes.com/sites/rickungar/2012/12/09/walmart-(http://investing.businessweek.com/research/stocks/snapshot/snapshot.asp? bails-on-obamacare- ticker=WMT)) has been cutting staff since the recession—and pallets of sticks-taxpayers- with-employee- merchandise are piling up in its stockrooms as shelves go unfilled. In the past healthcare-costs/) five years the world’s largest retailer added 455 U.S. Walmart stores, a 13 Rick Ungar Contributor percent increase, according to company filings in late January. In the same (http://www.forbes.com/sites/rickungar/)period its total U.S. workforce, which includes employees at its Sam’s Club warehouse stores, dropped by about 20,000, or 1.4 percent.” The article continues, “A thinly spread workforce has other consequences: longer checkout lines, less help throughout the store, and disorganization. Last month, Walmart placed last among department and discount stores in the American Customer Satisfaction Index, the sixth year in a row the company has either tied or taken the last spot. The dwindling level of customer service comes as Walmart has touted its in-store experience to lure financially

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strained shoppers and to counter the threat from online rivals such as Amazon.com (/companies/amazon/) AMZN -0.88% (/companies/amazon/) (AMZN (http://investing.businessweek.com/research/stocks/snapshot/snapshot.asp? ticker=AMZN)).” The Minimum Wage Fight-Ground Zero In The Clash Of So, does paying an employee a living wage make a difference when it comes to Conservative vs. Progressive America profits? (http://www.forbes.com/sites/rickungar/2013/02/16/the- minimum-wage- ﬁght-ground-zero-in- Harold Myerson writes in a terrific piece published in the-clash-of- today’s WashPo conservative-vs- progressive- (http://www.washingtonpost.com/opinions/harold- america/) meyerson-taking-the-service-out-of-the-service- Rick Ungar Contributor sector/2013/04/16/b0a47efe-a6b6-11e2-8302- (http://www.forbes.com/sites/rickungar/)3c7e0ea97057_story.html)—

“One lesson that emerges from the experience of low- end retailers is that putting workers in crummy, low- wage jobs tends to yield crummy service as well. McDonald’s earnings have fallen

(http://online.wsj.com/article/SB10001424127887324010704578414901710175648.html), the Wall Street (http://www.forbes.com/wall-street/) Journal reports, and a management webcast to franchise owners acknowledged that customer dissatisfaction is rising in part because “service is broken.” Myerson adds, “Some of the most successful retailers follow a different path. As MIT management professor Zeynep Ton argued in Harvard Business Review (http://hbr.org/2012/01/why-good-jobs-are-good-for-retailers) last year, Costco (http://www.huffingtonpost.com/2013/03/06/costco-ceo-minimum- wage-craig-jelinek_n_2818060.html) and Trader Joe’s pay their workers far more than many of their competitors, offer their employees opportunities for

The Great American promotion and enjoy markedly lower worker turnover and far higher sales per Retirement Scam: employee than their low-road counterparts. Sales per employee at Costco are Why The Wealthiest CEO's In America nearly double that at Sam’s Club.(emphasis added)” Want To Take Away Your Social Security (http://www.forbes.com/sites/rickungar/2012/11/28/the-As the old saw goes, you get what you pay for. Costco pays their employees a great-american- retirement-scam- livable wage and gets sales per employee at double what Walmart subsidiary why-the-wealthiest- Sam’s Club gets from their employees who work for lousy pay. ceos-in-america- want-to-take-away- your-social-security/) Maybe the time has come for Wal-Mart to take a lesson from Costco and Rick Ungar consider the potential upside of treating employees like human beings. Contributor (http://www.forbes.com/sites/rickungar/) It might just prove to be good for business.

Contact Rick at [email protected] (mailto:[email protected]) and follow me on Twitter (http://www.twitter.com/rickungar) and Facebook (/companies/facebook/)

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