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Thu Aug 29, 2013, 10:26 AM

 

Why Walmart and CostCo Are So Different

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 theyíre 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-Martís customer base, thatís where the resemblance ends. Costco really is a store where affluent, high-socioeconomic status households occasionally buy huge quantities of goods on the cheap: Thatís 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.

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Arrow 12 replies Author Time Post
Reply Why Walmart and CostCo Are So Different (Original post)
Bunnahabhain Aug 2013 OP
Scuba Aug 2013 #1
GeorgeGist Aug 2013 #2
Gidney N Cloyd Aug 2013 #3
Bunnahabhain Aug 2013 #9
Kingofalldems Aug 2013 #5
msongs Aug 2013 #4
City Lights Aug 2013 #6
leftynyc Aug 2013 #11
City Lights Aug 2013 #12
cbdo2007 Aug 2013 #7
Bunnahabhain Aug 2013 #8
Gormy Cuss Aug 2013 #10

Response to Bunnahabhain (Original post)

Thu Aug 29, 2013, 11:00 AM

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

 






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

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Response to Scuba (Reply #1)

Thu Aug 29, 2013, 11:05 AM

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

That is the real competition in my area.

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Response to GeorgeGist (Reply #2)

Thu Aug 29, 2013, 11:43 AM

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

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Response to GeorgeGist (Reply #2)

Thu Aug 29, 2013, 12:50 PM

9. Read the article

 

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

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Response to Scuba (Reply #1)

Thu Aug 29, 2013, 12:07 PM

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.

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Response to Bunnahabhain (Original post)

Thu Aug 29, 2013, 12:01 PM

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.

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Response to Bunnahabhain (Original post)

Thu Aug 29, 2013, 12:10 PM

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?

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Response to City Lights (Reply #6)

Thu Aug 29, 2013, 01:25 PM

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.

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Response to leftynyc (Reply #11)

Thu Aug 29, 2013, 01:27 PM

12. Thanks!

Costco kicks Sam's Club's ass!

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Response to Bunnahabhain (Original post)

Thu Aug 29, 2013, 12:43 PM

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.

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Response to Bunnahabhain (Original post)

Thu Aug 29, 2013, 12:48 PM

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?

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Response to Bunnahabhain (Original post)

Thu Aug 29, 2013, 01:08 PM

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

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