Not All Big Boxes Are Created Equal

Posted by Chuck Kocher
On June 2, 2014

Sometimes outward appearances can be deceiving. From the outside big box membership stores COSTCO and SAM’S Club may seem pretty much the same. The stores are laid out a bit differently. Their color schemes and logos are different. There are other points of differentiation, but when you get down to what they do—there are a lot of similarities.

Both companies are membership only retailers. Both are committed to offering discount pricing to their members/customers. And both are dedicated to no-frills presentation and low overhead to keep costs down.

So it stands to reason that COSTCO and SAM’S Club treat their employees the same way, right? Ah, but not all big box stores are created equal when it comes to employee relationships.

COSTCO, however, doesn’t see raising employee salaries and rising profitability as conflicting goals. And they’re putting their money where their mouth is. The average hourly wage for a full-time worker at COSTCO is just shy of $21—compared to the $12.81 average hourly wage that SAM’S Club pays it’s workers. That’s a pretty big difference!

One of the benefits of this generosity is that employee turnover rate came in at a low 10 percent for 2013. The rate for employees who had been with the company for at least a year was a paltry 7 percent. Those are great figures for any retailer. (Fortune magazine repeatedly asked SAM’S Club for their figures, but their requests fell on deaf ears)

One of the upsides of COSTCO’s low turnover is that they save a considerable amount of money on employee training. And one can’t help but think that having happy employees improves the overall customer experience for members.

So what does that mean for you? Does it mean that you should automatically pay your employees 64 percent better than your competitor? Not necessarily. Financial compensation isn’t the only effective incentive. And just increasing wages doesn’t guarantee that your employees will be loyal (or even happy). The bigger picture is that there are two sides to cutting costs. Sometimes spending more can actually save money.

One thing COSTCO’s approach does, however, is to put meat on the bones of the standard, “Our employees are our most valuable asset” mantra. A lot of companies give that idea lip service. COSTCO puts their money where their lips are.