Challenging the WalMart Model

There was a good piece in Businessweek earlier this summer on Costco, a large retailer which pays workers far better than WalMart. Why the success of Costco and firms like it?

Many conscientious companies such as Costco are performing well financially. Over the last few years, Nordstrom (JWN), the Container Store, Sephora, REI, and Whole Foods Market (WFM), all of which are known for treating employees well, have outpaced rivals. “This is the lesson Costco teaches,” says Doug Stephens, founder of the consulting firm Retail Prophet and author of the forthcoming The Retail Revival. “You don’t have to be Nordstrom selling $1,200 suits in order to pay people a living wage. That is what Walmart has lost sight of. A lot of people working at Walmart go home and live below the poverty line. You expect that person to come in and develop a rapport with customers who may be spending more than that person is making in a week? You expect them to be civil and happy about that?”

Labor strife involving “Our WalMart” has enveloped Costco’s low-pay rival. Of course, things aren’t bad for the people who really matter at the company: “In 2012, three members of the Walton family each made over $4 billion just from stocks and other investments.” Yet for customers shocked by empty WalMart shelves, and taxpayers effectively subsidizing WalMart workers who need to apply for food stamps and Medicaid, the low-wage model isn’t working.

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