Walmart vs Costco
If you run a business that is dependent on Government Corporate Welfare and still can’t make a profit without paying your workers less than a living wage but other companies still offer lower prices a living wage and better healthcare.
Then you are to STUPID to run a business.
The first charge I make is that Walmart is dependent on Corporate Welfare.
According to the Winning Words Project, who studied Wal-Mart’s effect on the economy, Wal-Mart’s very existence has been a net loss for communities. Consider what they found.
• Wal-Mart’s intentionally low wages force employees to need approximately $420,000 per year, per store, totalling $2.66 BILLION annually in Food Stamps and other taxpayer assistance…to survive.
• Wal-Mart’s intentionally low wages and lack of covered benefits cost taxpayers over $1.02 BILLION a year in healthcare costs.
• Wal-Mart’s intentionally low wages cost taxpayers as much as $225 MILLION in free and reduced price lunches for school-age children.
• Wal-Mart’s intentionally low wages cost taxpayers over $780 MILLION in tax deductions for low-income families.
$2.66 billion in food stamps and tax benefits plus $1.02 billion in healthcare costs, plus $225 million in free school lunches and $780 million in tax deductions a year which comes to a total of $ 4.685 billion dollars a year comes out of Our Pockets!
Any idiot can make a profit and undercut the competition in prices with a $4.685 Billion a year Tax Payer funded cash advantage.
Just how the Hell can Costco make more money than Sam’s Club ( Sam’s Club is owned by Walmart ) per square foot of retail space and have lower labor costs when Costco pays its workers $17 dollars an hour? Just what in hell is Walmart doing wrong?
1 ) a lower operating margin
Costco keeps around a 3% operating margin, which means for every dollar in sales they get 3 cents of profit before things like interest and taxes.
Wal-mart’s operating margin is around 6%, and Target’s is almost 8%.
t’s is almost 8%.
If prices are low enough you can sell more product. Sell enough product and you can pay your workers more give them better healthcare and not have your workers on welfare.
2) In addition, don’t advertise – that saves 2 percent a year in costs
3) Mr. Sinegal’s elbows can be sharp as well. As most suppliers well know, his gruff charm is not what lets him sell goods at rock-bottom prices – it’s his fearsome toughness, which he rarely shows in public. He often warns suppliers not to offer other retailers lower prices than Costco gets.
When a frozen-food supplier mistakenly sent Costco an invoice meant for Wal-Mart, he discovered that Wal-Mart was getting a better price. “We have not brought that supplier back,”
4) A typical Costco store stocks 4,000 types of items, including perhaps just four toothpaste brands, while a Wal-Mart typically stocks more than 100,000 types of items and may carry 60 sizes and brands of toothpastes. Narrowing the number of options increases the sales volume of each, allowing Costco to squeeze deeper and deeper bulk discounts from suppliers.
Costco’s practices are clearly more expensive, but they have an offsetting cost-containment effect: Turnover is unusually low, at 17% overall and just 6% after one year’s employment. In contrast, turnover at Wal-Mart is 44% a year’close to the industry average. In skilled and semi-skilled jobs, the fully loaded cost of replacing a worker who leaves (excluding lost productivity) is typically 1.5 to 2.5 times the worker’s annual salary. To be conservative, let’s assume that the total cost of replacing an hourly employee at Costco or Sam’s Club is only 60% of his or her annual salary. If a Costco employee quits, the cost of replacing him or her is therefore $21,216. If a Sam’s Club employee leaves, the cost is $12,617. At first glance, it may seem that the low-wage approach at Sam’s Club would result in lower turnover costs. But if its turnover rate is the same as Wal-Mart’s, Sam’s Club loses more than twice as many people as Costco does: 44% versus 17%. By this calculation, the total annual cost to Costco of employee churn is $244 million, whereas the total annual cost to Sam’s Club is $612 million. That’s $5,274 per Sam’s Club employee, versus $3,628 per Costco employee.
5) Shrinkage/Employee theft
For example, it had extremely low employee shrinkage. While the industry average was somewhere between 2 and 4 percent, Costco’s was less than 0.02 percent. Managers believed that their good wages and benefits were the reason that employee theft was so low.
Conclusion Costco saves 2% from not advertising I thought the whole point of advertising was to make money but it seems Costco makes more money giving ad dollars to consumers as lower prices. If we assume Walmart is at the low end of the retail industry employee theft costs at 2% and Costco is at an amazing .02% then Costco has a 1.8% cost advantage add the 2% from no advertising savings and you get 3.8% savings.
Does anyone know how to calculate
the total annual cost to Costco of employee churn is $244 million, whereas the total annual cost to Sam’s Club is $612 million. That’s $5,274 per Sam’s Club employee, versus $3,628 per Costco employee.
Employee turnover costs as a percent of sales?
I do not have any idea how to calculate Costco offering fewer brands of goods to get cheaper bulk discounts than Walmart.
But still you get the idea paying employees more cuts down on employee theft and lets you hire the best job applicants. Advertising is a waste of money if you got the cheapest prices and very good quality goods. Cheap prices and quality goods improve sales so much you can afford to pay your workers well and give them great healthcare.
We should Nationalize Walmart give all their stores to Costco and save the tax payer $4.685 Billion a year. Walmart stock holders should not be compensated for the loss of their stock they got their cash from the tax payer for decades.