Walmart’s smarter, prettier cousin

Walmart may be largest employer of US citizens, but that does not mean people like to work there. As West talked about in his article “To the People of Walmart”, many of the employees live under the poverty line. Furthermore, when Walmart enters a market most of the small business in the area will have to close and find other ways to make money. Walmart also makes employees work just under the full time employee hour mark, which allows them not to pay for any type of benefits. Even though I agree with West about the fact that they are a shinning example of growth in the US, I think they could conduct their business very differently. They have decided to increase the minimum wage to nine dollars an hour and then ten dollars an hour by next year, but this doesn’t deal with the underlying issues within the company.

A company that operates in a very different fashion from Walmart is Costco. They have grown at an amazing rate over the past couple years while paying their employees a living wage. The average wage for a Costco employee is about $21 and hour and their starting average wage is around $12 an hour. This results in a much lower turnover rate for their employees. This allows the company to retain their employees, while paying them a decent wage and giving them good benefits. Additionally, it increases the number of applicants for Costco, which allows them to be more selective. Some people even argue that more people are willing to shop at Costco because they know that the employees are being paid a fair wage. Realistically, people are not only shopping there because of the employees, but due to the national craze around saving while buying in bulk. I can safely say that I also take part in this hysteria that has swept the nation. I love shopping at Costco because it is a very enjoyable experience. The constant samples, coupled with the supposed amazing deals make me enjoy shopping more than I ever have.

The issue is that neither of these companies can deal with the destruction of local businesses. Whether it is Walmart, Costco, or even Target, most of the local businesses cower in fear. The prices that the big box stores charge are substantially lower than what the small business owners can charge. The only way to deal with the loss of local jobs is to differentiate themselves. If I were working as an executive for either Costco or Walmart, I would create an initiative that helps local businesses. This would be in the interests of both the big box store and the local businesses. Even though I may decrease the profits by a small margin, I could increase the public’s perspective of our business. I would hire a team to have workshops before we opened a new store, and talk with the local businesses about how they can survive through specialization. This would make them and the local community happier. The large corporations could help the local business people keep their jobs while creating more with the introduction of the large store. In the end it could change the perception of big business attacking small local shops.



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5 thoughts on “Walmart’s smarter, prettier cousin

  1. In theory it would be in the interest of big box stores to support small business, but how much can they really do if the economics of the business end up putting the smaller guys under. I do agree though, Walmart or Costco could put together other initiatives to help the people that they’ve put out of work, even if it isn’t supporting their local business.


  2. I have to agree with Peter here, it is difficult for big corporations to look out for small businesses as well as themselves. Sometimes they can’t even take care of one business let alone other smaller ones. I believe that this would be great and that it is an ideal world, but I just do not believe that companies are going to sacrifice for small companies they’re competing with.


  3. With the higher starting wages and average wages overall, the difference in turnover rate is a huge differentiator. Wal Mart usually has turnover rates near 100% each year, which in the long-term, just doesn’t give you the benefits that CostCo can attain by keeping employees year-to-year at higher levels of productivity. As you said, you also start to see this in the minds of customers; especially in today’s age, I think we are going to see a lot more people start using factors such as employee treatment as criteria for picking a store when there are several substitutes, something we might not have said a decade or two ago.


  4. Wow, I had no idea Costco paid its employees so well. I guess I considered Costo to share in the excessive price cutting mindset that Walmart believes in. While I’m not very knowledgeable of Costco’s business model and how it differs from Walmart, I see this as a sign in the right direction that big box stores are capable of increasing working conditions for its employees.

    In terms of competition to small business owners, I pose one question, how important is price differentiation for consumers? It seems to me that the most influential competitive advantage that big box stores have over small businesses is the ability to provide the lowest price.

    However, if you’ve been to a Walmart, you know you make sacrifices in customer service, buying experience, and overall consumer satisfaction. Local businesses should capitalize on their ability to remedy these issues. I think current consumers (+/- 3 years from now) care a lot about price competition but in the future I believe there’s a possibility for change. Look at Whole Foods. Consumers give up low prices for a better buying experience. I think a trend such as this will positively impact the local business which compete with big box stores for market share.


  5. What I meant when I was writing about Costco and Walmart helping out the local stores was that they would suggest for local stores to specialize in a specific area and customer service. This same idea applies with banks. Local banks can compete with the larger national banks because they are all about customer service and caring about the community. I do realize that there is very little chance that the big box stores would be interested in having meetings that help local businesses, but it could be possible.


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