Customers First

Employees second. Vendors third. Shareholders fourth. That is Costco’s business model, somewhat, but not overly simplified. Even in a State like California, where many of it’s employees are unionized, they continue to beat Sam’s Club in profitability. Costco pays even non-union employees nearly twice as much as any of their competitors, even during lean years. As a result, their employee retention rate is the best of any retail business. More productivity, more sales per square foot. Jim Sinegal, CEO of Costco, pays himself a whopping 350,000 dollars a year. Care to know what Walmart pays theirs? Around 5.3 million. Costco pays nearly 94% of their employees health care costs, even part-time employees.

“Wall Street is in the business of making money between now and next tuesday, we are in the business of building an organization, an institution that we hope will be here 50 years from now. And paying good wages and keeping your people working with you is very good business.” (Jim Sinegal)

I posted this partly of of frustration at not being able to succinctly write down my thoughts about business ethics, and the future of Americanized capitalism. So, it occurred to me to just highlight some people and companies that actually serve as possible models to save us from this dangerous race to the bottom.

I’ll talk about Publix on Wednesday…

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8 Comments

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8 responses to “Customers First

  1. What is the simplified model for Wal-Mart? Lessee…Shareholders first, shareholders second, shareholders third, shareholders…
    …Dick Cheney 44th…that dog from Frasier 68th…bellybutton lint 108th…oh, and customers, employees and vendors somewhere in the 200s.

  2. nm

    Ya know, I’ve read a lot of Adam Smith. And when he talks about “enlightened self-interest” as the motivating force of markets, he always takes it for granted that enlightened thinking will be long-term. Every context, every example he discusses is long-term. He takes it so completely for granted, sadly, that he doesn’t explicitly address the idea. And, because he doesn’t, all these short-term Harvard Business School clones who have been in charge of things for the past 25 years ignore it.

  3. Wow, nm, that’s something I’ve been trying to put my finger on for the longest time! Every time someone starts talking about rational self interest, I keep going back to “but it’s not rational under X, Y, Z circumstance”… and then wondering if maybe what is ‘rational’ to me isn’t rational to everyone else. (Which I still hold to – I think it’s very difficult to deal with individual actions as a result. Differing ideas of rationality, differing calculi of utility and so on.)

    But it occurs to me that a lot of that has to do with the scope of the question, not the parameters.

  4. democommie

    Mack:

    The only problem is that Costco is hard to find around where I live. In fact I’m not sure if they have any stores in NY. The best I can do is BJ’s which is not great, but still better than Sam’s or Wal-Mart.

    Wal-Mart is opening a new store near the town I live in (they only have two, now, within 15 miles of where I live). I guess they detected some sort of pulse from the feeble but still, apparently, viable downtown and they must stamp it out.

    Sam Walton must be spinning in his grave.

  5. Pingback: Music City Bloggers » Blog Archive » Neighbourhood Watch (?)

  6. I’m interested to hear your thoughts on Publix.

    Oh, and although it’s a fat chance that you’ll actually participate, I must inform you that you have been tagged by me to do a meme (today’s your lucky day!) :)

  7. I knew CostCo paid their employees better wages and benefits than WalMart, but I didn’t know all of the rest.

    I must say, it’s always a pleasure shopping at CostCo. The employees are always very kind and everyone always seems to be having a good day — not like the surly Kroger employees who rattle off “thank-you-and-have-a-great-day” as if they’re afraid their pay will be docked if they forget.

    Someone told me CostCo has a real profit-sharing model for its employees and it shows.

  8. Oooops, hit “submit” too soon. Meant to add:

    That said, there’s only so much mayonnaise and cheap Chinese crap I need. I guess if you’re a family of four CostCo is a great deal, but when it’s just me and Mr. Beale, I really DO wish we could just buy one dozen bagels, not two dozen.

    It’s been great for church events like Room In The Inn, though, when we’ve been feeding 25 people.

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