business news in context, analysis with attitude

Regarding the debate about Wal-Mart and Costco and why the latter seems to pay so much better than the former, one MNB user wrote:

I haven't been in Costco as much as Sam's and neither that many times.

But when you think about just the stocking operation that takes place in either store, Wal-Mart or Costco, you should recognize in a second that there's no comparison between the two.

Wal-Mart's cost for keeping merchandise on the floor and the number of people required to do it gives Costco an advantage that should measure in the hundreds of million dollars higher cost for Wal-Mart annually.

The typical Supercenter has 400-600 employees. I've never heard how many a typical Costco employs but I bet it's a fraction of a Supercenter. Compare those numbers and costs by the number of stores Wal-Mart operates compared to Costco and you should easily recognize why one can pay better than the other.

Doesn’t Wal-Mart also generate, like, six times the sales as Costco?

Listen, Wal-Mart is under no legal requirement to pay anyone more than minimum wage. For the moment, it isn’t even required to provide better health care benefits than it is providing. Nobody is debating that.

The question – and it deserves to be considered – is whether a philosophy that may create the impression that the store employee is an unemployable, easily replaced commodity is one that will serve it well in the long term.

The answer to that question at the moment seems to be “don’t fix what isn’t broken.” And Wal-Mart would certainly quibble with the way we just characterized its philosophy.

But we’re not alone in asking the question. And because so many companies try to emulate the Wal-Mart approach, the impact that its employment strategies could have on retailing in general certainly is worth consideration.

One MNB user offered the following example:

This past week I traveled south to meet with some friends I haven't seen in a year. During the week, Wal-Mart came up in the conversation. I mentioned the minimal impact in my area, where shoppers still have lots of options (Costco, Target, etc.), and stated that I made it a point NOT to shop at Wal-Mart, because I don't support their apparent lack of social responsibility.

A friend of mine from Mississippi said she would also choose to not shop at Wal-Mart, if she only could. Unfortunately there are no other stores within any kind of reasonable distance. I suspect employees looking for jobs in certain parts of the country face that same situation. They cannot "look for a better job" unless they leave the area completely.

By the way, my Mississippi friend also mentioned that in her area Wal-Mart opened a store close by, drove the competition out of business, then closed that store and opened one farther away, near other competition…

Another MNB user seems to have been turned off by the battle Wal-Mart is having with its former vice chairman, Tom Coughlin:

I worked at Wal-Mart for many years and had the chance to meet Mr. Coughlin early in my career and many more times during my time with the company. I find it impossible to believe he was dishonest and would do anything to hurt the company he worked so hard to build up.

I remember many meetings that he joked and kidded with other executives and played practical jokes to lighten the mood but when it came time to be serious it was obvious that he cared deeply about Wal-Mart.

There were many times that he inspired us out of tough situations and rallied us to believe in our company and the paths we were taking.

I also know that there have to be many people that wanted his job, his place in the company. I know you can’t be a strong leader like he was without making some enemies along the way. And I have seen many good people forced out of Wal-Mart by the system that allows an one-sided ‘open-door policy’ to ruin peoples reputations and make lies and gossip into ‘fact’. People who can’t succeed love to destroy those who do.

Tom, I am sorry you dedicated 27 years to Wal-Mart and then got bitten in the butt. I hope it is small comfort to you to know that management in the field present and past don’t believe a word of it.

The Coughlin story has not yet had its final chapter written. Not by a long shot.

And we suspect that when it is all done, there will be more than one reputation that has been sullied, and maybe more than a few indictments issued by grand juries.

Yesterday, we posted an email that questioned our contention that Safeway had blamed the unions for the poor performance at Dominick’s. Which led MNB user Joe DeMaine to write:

Not only did Safeway say that labor costs had a major negative impact on their sales, they threatened to close more stores (after closing 12 underperforming stores) if they did not get the collective bargaining agreement they claimed they needed to be competitive in the Chicago market. Hmmmm, I wonder how the DiMatteo family and Yucaipa investment firm was able to grow the chain, build sales volume and market share with such an unfair labor agreement? Obviously, they didn't understand the grocery business as well as Safeway does!

Such cynicism…

By the way, one of our MNB users asked a question we don’t know the answer to:

Do you know why seemingly the only industry allowed to package food/beverage without nutrition labeling is the beer industry? I've always wondered…

We have no idea.


We wrote the other day that the cleanliness of a store’s public restrooms is a direct reflection of how highly it values its customers. MNB user Joe Fraioli responded:

Although I agree with you in theory that the restroom up keep may be a direct reflection on how the retailer feels about their customers, please remember that it is not always a reflection of the local store manager. When I worked in retail we were told to have the bathrooms open to the public (even though we didn't need to by law), however they put no budget or plan in place to keep these bathrooms clean, which caused endless issues. I was unable to pay anything extra for clerks to become temporary janitors and was often forced to do the clean up myself. At points I closed the restrooms and would argue with my supervisor about re-opening them without getting a cleaning service first.”

Good point.

Store managers often have to play the hand they are dealt. More times than we can believe, headquarters will stack the deck against them.

On the subject of the new possible case of mad cow disease, MNB user Jim Farina wrote:
It sounds like time for the USDA to allow meat processors to test for MCD if they want to. Then grocers could create a "premium" brand that advertises the fact that it has been tested and passed. They could even sell it at a higher retail price.

Once one vendor breaks the logjam, every other processor will have to follow suit.

The government’s unwillingness to allow private testing for mad cow disease is one of the central reasons we remain so suspicious that science is being placed second to commerce.
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