The Formula That Made Costco the Anti-Walmart

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Costco storeBy Ashley Lutz

Big-box warehouse store Costco (COST) is often compared with Walmart's (WMT) Sam's Club. Both stores are places where people go to buy in bulk and save money.

But while Walmart employees are striking for higher wages and healthcare, Costco has among the happiest employees in the business. Costco also offers the occasional brand-name, like Coach, alongside leather sofas and crisp dress shirts.

The quality of products and happy employees make Costco the "Anti-Walmart," writes Steven Greenhouse at the New York Times.

He details the six-part strategy by CEO Jim Sinegal that helped Costco get there.
  • Sell a limited number of items. Despite Costco's large store volume, it only sells four toothpaste brands. Walmart sells 60. Selling fewer items increases sales volume and helps drive discounts.
  • Rely on high volume. People go to Costco to buy in bulk. Buying large amounts of products helps keep costs down for Costco.
  • Pay workers well. The average salary of a Costco employee is $17, twice that of Walmart. This results in low turnover and a better-trained staff.
  • Have customers pay for memberships. Costco shoppers pay in order to buy merchandise at the store.
  • Aim for high-end customers. Costco does this by offering higher-quality items and occasional brand names.
  • Don't advertise. This saves Costco 2 percent of its budget each year.
Although Costco it's lauded as the "Anti-Walmart," it's also worth noting that the warehouse retailer has a completely different core customer. While Walmart sells single rolls of toilet paper to accomodate people who can't afford a whole pack, Costco caters to upper middle class shoppers who get a kick out of a bargain.

The Formula That Made Costco the Anti-Walmart

In fiscal year 2012, Walmart registered approximately $444 billion in sales, which is $20 billion more than Austria's GDP. If Walmart were a country, it would be the 26th largest economy in the world.

Photo: Wikimedia Commons, Andrew Bossi

Walmart has more employees worldwide — 2.2 million — than the population of Houston. The mega-retailer employs 1.4 million people in the U.S. alone.

Source: Walmart Corporate & Financial Fact Sheet

Photo: Flickr, jimmywayne

If Walmart were an army, it would have the second largest military in the world, behind China.

Photo: Wikimedia Commons, BrokenSphere

Walmart is bigger than Home Depot, Kroger, Target, Sears, Costco, and K-Mart combined.

Source: Seeking Alpha

Photo: Flickr, Kevin Dooley

The average family of four spends over $4,000 a year at Walmart.

Source: Otherwords.org

Each week, Walmart serves more than 200 million customers at more than 10,400 stores in 27 countries.

Source: Walmart Corporate & Financial Fact Sheet

One of every four dollars Americans spend on groceries is spent at Walmart.

Source: Otherwords.org

Photo: Flickr, G.e.o.r.g.e

In 2010, CEO Michael Duke's annual salary of $35 million earned him more in an hour than a full-time employee makes in an entire year.

Source: ABC News

In 2009, Walmart sold more bananas than any other item.

Source: Bloomberg

Photo: Flickr, PinkMoose

China's exports to Walmart accounted for 11 percent of the growth of the total U.S. trade deficit with China between 2001 and 2006.

Source: Economic Policy Institute

Photo: Wikimedia Commons, Agnieszka Bojczuk

If Walmart's more than 900 million square feet of retail space were spread out over one place it would take up roughly 34 square miles, which is about 1.5 times the size of Manhattan.

Photo: Wikimedia Commons: Daniel Schwen

Walmart parking lots alone take up an area roughly the size of Tampa, Florida.

Source: Walmart Watch

Photo: Wikimedia Commons: Wt90401

In 2000, Walmart was sued 4,851 times, or about once every 2 hours.

Source: USA Today

Photo: Wikimedia Commons, maveric2003

90 percent of all Americans live within 15 miles of a Walmart.

Source: Business Pundit

The Walton family has given away about 2 percent of its net worth to charity — Bill Gates is giving away 48 percent of his net worth and Warren Buffet 78 percent of his net worth.

Source: Business Pundit

An additional Walmart Supercenter per 100,000 residents increases average BMI (body mass index) by 0.25 units and the obesity rate by 2.4 percent.

Source: SSRN

The most frequent destination typed into GPS device Telenav is Walmart.

Source: Wireless and Mobile News

Photo: Wikimedia Commons, Attitude2000

Roughly 4,700 (about 90 percent) of international stores operate under a banner other than Walmart, including Walmex in Mexico, Asda in the UK, Seiyu in Japan, and Best Price in India.

Source: Walmart Corporate & Financial Fact Sheet

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