"We pay much better than Wal-Mart," says Costco CEO Jim Sinegal. "That's not altruism. It's good business."
Thanks to progressive management thinking and significant union membership, this growing big-box chain offers average wages almost double those of Wal-Mart--$16 versus $9.68 per hour. After three years a typical full-time Costco worker makes about $42,000. The company foots 92 percent of health insurance cost.
Nonetheless, Costco's labor costs are lower than Wal-Mart's: 9.8 percent of revenues as compared to Wal-Mart's 17 percent. Costco's workforce is 50 percent more productive than Wal-Mart's. Its turnover rate is half Wal-Mart's, and 82 percent of workers receive health coverage.
Costco's secret lies in valuing its employees. Chief Financial Officer Richard Galanti explains: "From day one, we've run the company with the philosophy that if we pay better than average, provide a salary people can live on, have a positive environment and good benefits, we'll be able to hire better people, they'll stay longer and be more efficient."
With 300 stores as compared to Wal-Mart's 3,600, Costco is very much a David facing a monstrous Goliath. That gives Wal-Mart big competitive advantages. But many Americans who would never support Wal-Mart will more feel comfortable giving Costco their business.
Costco does not solve all the problems posed by big box retail but, at a minimum, it is a big box that cares. Sinegal, by the way, keeps his salary at 10 times that of his average employee. That's $350,000, as compared with Wal-Mart's CEO Lee Scott, who earns $5.3 million.
... and locally-owned stores
Networking is one powerful defense against the Wal-Mart trend, as locally owned Triangle businesses are finding out.
In Raleigh, a small group of business owners formed the Raleigh Independent Business Alliance, aka Raleigh Unchained (www.raleighunchained.org) last year as a chapter of the American Independent Business Alliance (amiba.net). Its members include Quail Ridge Books, Expressions Furniture and Tookie's Toys, as well as insurance, appliance and car repair providers (there's a member directory on their Web site). Cheryl Daly, owner of Buchanan's Nursery, is the group's president.
The group offers joint promotion as well as mutual support. Restaurants and stores that are locally owned are welcome to join for a $200 annual fee.
Similar organizations don't exist in Durham or Orange County. Most independent retailers rely on word of mouth. John Parker of Good Work, a Durham-based nonprofit that helps small businesses get started, says that's not such a bad thing.
Parker invites anybody looking for referrals for goods and services--or any small business who'd like to be considered as alternatives to Wal-Mart--to call him at 682-8473 ext. 11 or e-mail him at email@example.com.