Why Walmart and CostCo Are So Different

[Bunnahabhain]

A Bloomberg article today examines the business model of the two chains. The long and short of it is Walmart's target customer is the bottom two quintiles while CostCo targets the top quintile. This is why CostCos are almost exclusively located in upper middle class suburbs. Poorer people do their everyday shopping at Walmart whereas affluent people tend to do occasional shopping at CostCo to make bulk or larger purchases.

The title of the article is, "Why Wal-Mart Will Never Pay Like CostCo." http://www.bloomberg.com/news/2013-08-27/why-walmart-will-never-pay-like-costco.html

From the article:

I wrote about this last spring in regard to Wal-Mart and Costco. Upper-middle-class people who live in urban areas -- which is to say, the sort of people who tend to write about the wage differential between the two stores -- tend to think of them as close substitutes, because they’re both giant stores where you occasionally go to buy something more cheaply than you can in a neighborhood grocery or hardware store. However, for most of Wal-Mart’s customer base, that’s where the resemblance ends. Costco really is a store where affluent, high-socioeconomic status households occasionally buy huge quantities of goods on the cheap: That’s Costco's business strategy (which is why its stores are pretty much found in affluent near-in suburbs). Wal-Mart, however, is mostly a store where low-income people do their everyday shopping.

[Scuba]

1. There are other important differences as well ....

And yet goods are actully as low priced - or lower - at Costco.

[GeorgeGist]

2. How does CostCo compare to Sam's Club?

That is the real competition in my area.

[Gidney N Cloyd]

3. Yeah, that's more apples & apples.

[Bunnahabhain]

9. Read the article

They compare CostCo to Trader Joe's which is a better comparison given the metrics of comparison.

[Kingofalldems]

5. Yeah, but they're not skilled and I am worried that

a skilled worker will come and take their job!! So they should all be paid WalMart wages.

[msongs]

4. it's NOT about the customers - it's about profits and who gets to keep them. Walmart is a greedy

family who wants more more more for itself and the best way to insure that is to keep wages low low low. Walmart could easily pay higher wages and still be massively profitable but it chooses not to.

[City Lights]

6. Comparing Walmart and Costco doesn't make a lot of sense to me.

A better comparison would be comparing Costco and Sam's Club. Those stores have similar content. What does Sam's Club pay its employees?

[leftynyc]

11. Second chart in post #1 does just that

I've never been to Wal-mart or Sam's Club but love Costco (to be perfectly honest, until a few years ago, there wasn't a Wal-mart anywhere near me so that was easy). I live alone so don't generally buy food at Costco but toilet paper, paper towels, Zantac and other drug store stuff. I want to support them because of how well they treat their employees.

[City Lights]

12. Thanks!

Costco kicks Sam's Club's ass!

[cbdo2007]

7. This is a dumb comparison. Walmart's customers can't afford to shop at Costco and

Costco customers are more likely to throw their money away on stupid stuff they see at Costco but don't need.

This isn't to disparage Costco, but many times people pay more for stuff just because it's at Costco and they *think* it's a good deal, when it really isn't. I have a set list of about 20 things I get at Costco once a month, mostly food items, and am disappointed walking through the rest of the store seeing all the things they want us to buy.

[Bunnahabhain]

8. Wal-Mart and CostCo get compared on DU all the time.

It's usually to say CostCo is doing fine and pays its workers more than Wal-Mart ergo Wal-Mart could pay their workers more. This is why I posted this particular article. To anyone in this thread saying the two business models are sufficiently different that a comparison of the two chains is difficult to do on a meaningful basis in regards to their labour forces I would agree with you. Again, that would be the point of the article.

So now we can never have another thread comparing wages at CostCo and Wal-Mart as we can see their business models are sufficiently different to make the comparison meaningless?

[Gormy Cuss]

10. McArdle seems to be on a "Dump on that commie Costco" mission.

Here she dumps on Costco because they outsource food demonstration. The demonstrators are paid less than Costco employers and don't qualify for benefits because they're all part timers--although based on the wages cited ($11/hr) they're still better paid than many part time Walmart employees. Her fantasy that they'd be better off working for Sam's Club because they would qualify to move up is laughable. At Sam's Club they may be eligible for benefits as full time employees but as 12 hour/week part timers? Bloody unlikely.

http://www.bloomberg.com/news/2013-08-28/costco-s-second-class-citizens.html

That said, Costco could do better by this contract employees.

eta: I was wondering why McArdle just attached a link to a 2008 article rather than do her own reporting. Oh look! in 2010 Walmart started outsourcing their food demonstrations too.

http://www.nwitimes.com/business/local/sam-s-club-layoff-targets-product-demonstrators/article_56f758a7-ccc5-5445-99e4-50757d64b4d5.html