The Formula That Made Costco the Anti-Walmart
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.
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