
Why Wal-Mart Will Never Pay Like Costco - georgecmu
http://www.bloomberg.com/news/2013-08-27/why-walmart-will-never-pay-like-costco.html?utm_source=buffer&utm_campaign=Buffer&utm_content=buffer8003f&utm_medium=twitter
======
tokenadult
Having read the interesting article submitted here, I have to say that it is
refreshing to see an analysis of different approaches to retailing that
focuses not only on the demographic groups served by the different retailers,
but also on the SKU (stock-keeping unit) count for each retailer. Having more
different products in stock is more expensive than having fewer different
products in stock. Carrying "name" brands is usually more expensive than
carrying "store" brands.

There are plenty of other differences between the shopping experience at Wal-
Mart and Costco. A peculiarity of local geography is that we find that the two
Costco stores at our end of the Twin Cities metropolitan area are just never
on our way to anywhere else, so we let our Costco membership lapse after just
one year. For quite the same reason, we hardly ever shop at Wal-Mart. But we
shop at Sam's Club (the Wal-Mart version of a warehouse store like Costco) all
the time, simply because it is on my way to work and largely on the way to
many of our other trips during the week. Today we built a trip to Aldi into
our schedule while our daughter was at soccer practice about halfway from our
house to that store. We love to minimize driving--driving costs both money and
time. Some stores cannot thrive unless they are within SHORT drives of many
customers. Some of those stores have to extract a lot of productivity out of
each worker to pay the workers even minimum wage.

I still wonder when Amazon is going to go all-in in setting up major same-day
delivery centers in most metropolitan areas in the United States. That could
have a revolutionary influence on my shopping habits. And if robots can do
more of the stocking of shelves, and eventually self-driving cars do most of
the delivering, that business model could end up with huge market share. I'm
very happy when workers at menial retail jobs are paid more--I have had such
jobs (at Sears and at Target, many years ago). But they best gain opportunity
to advance themselves economically when they also can save on their own
consumer spending in retail stores. Everyone likes low prices day in and day
out.

~~~
thetrb
I'd love to have an Aldi in the Silicon Valley, at least if the concept is
similar to the ones in Germany.

~~~
Amadou
The Aldis in Illinois roughly 20 years ago were bottom-barrel discount grocery
stores. Poorly maintained and all the produce was very suspicious. I don't
know which half of the Aldi empire owned those stores.

Trader Joes is owned by the north aldi brother.

~~~
X-Istence
That's the Aldi I know and love from The Netherlands... so I assume it is like
the ones in Germany.

~~~
sudont
It is. The Aldi's in Wisconsin, USA are pretty much the exact same as the one
I was at in Berlin, except for different brands. Pretty much the same layout,
except the Berlin one had beer.

~~~
rthomas6
Aldi in Georgia, USA has beer also.

------
jusben1369
I don't think I missed it but I am confused why the author steered clear of
some really interesting data. Based on the table Walmart has 2X the profit
margin of Costco. Walmart's doing around 4.5x topline revenue but over 9x the
total profit amount.

For the author's central point to hold true those numbers need to be more
closely aligned. That is, they need to be roughly the same in % terms. They
aren't, which means one or both of the players are doing something
substantially different in their approach. Given that labor costs are the
single largest expense for these types of business it's not unreasonable to
reach the conclusion of those she's rebutting with this article. Namely that
Walmart is overly maximizing profits based on the back of paying extremely low
wages. To put it another way, if for some reason Walmart was told to bring
it's margins in line with Costco the easiest way to do that would be to bring
your wages up and keep your prices the same.

Let's do back of the envelope math based on the chart in the article. If
Walmart had the margins of Costco rather than the current ones that would see
it's profit dip from $15.6 billion to $7.53 billon. That in turn would "free
up" $8 billion in what is now pure profit. With 2 million global employees you
could pay them all $4K more. That's a 20% salary increase for the basic salary
they highlighted of $20K per year.

I'm not bashing Walmart. I'm just pointing out that Costco seems to have made
the decision to have meaningfully smaller margins than Walmart. Given where
the bulk of their costs lie they must have had the conversation more than once
about paying folks less to move those margins up to please Wall Street more.
Yet they have decided not to do that. Perhaps it's simply because they believe
the business benefit around being easier for them to be accepted in new
communities (and thus grow) based on the real and perceived perception that
they treat their workers well.

PS: Anecdotally Walmart opened near us two months ago. I have now been there 4
or 5 times. I am struck by just how many people there are working there on the
floor. There seem to be too many whenever I'm there. They look bored and so
congregate in groups and shoot the breeze. I couldn't get that out of my mind
as the author kept stressing they really need a lot more employees.

~~~
markost
Did you notice the data point in the article that Costco makes $2 billion in
membership revenue and yet makes $1.7 billion in profit, which means they
effectively lose money on their sales?

In fact, a little known feature of Costco's business model is their ability to
sell all their stock well before their suppliers require payment for goods
(Net 30)? This means they have an effectively _negative_ cash conversion
cycle, or in other words, their suppliers are paying to stock their products.

Everything about Costco's business model is backwards.

~~~
tanzam75
> _Did you notice the data point in the article that Costco makes $2 billion
> in membership revenue and yet makes $1.7 billion in profit, which means they
> effectively lose money on their sales?_

That $1.7 billion is net income, which is after subtracting out the income
tax. You have to compare to pre-tax income, which in the case of Costco is
essentially just operating income.

75% of Costco's income came from membership fees in the last fiscal year, and
similar or higher percentages in other recent years.

From Costco's FY 2012 annual report, page 25 (in millions of dollars):

    
    
             Membership   Operating income
      2008      1,506          1,969
      2009      1,533          1,777
      2010      1,691          2,077
      2011      1,867          2,439
      2012      2,075          2,759
      

PDF file: [http://phx.corporate-
ir.net/External.File?item=UGFyZW50SUQ9M...](http://phx.corporate-
ir.net/External.File?item=UGFyZW50SUQ9MTY1MTY0fENoaWxkSUQ9LTF8VHlwZT0z&t=1)

The membership fee, of course, serves another purpose. It reduces patronage by
lower-income shoppers, and therefore helps to reduce shoplifting. The receipt-
check is another deterrent. Since Costco has such a tight margin on its
merchandise, it cannot tolerate industrywide shrinkage rates.

~~~
rogerbinns
The receipt check is generally there to catch crooked cashiers not crooked
customers. Without it a cashier could fake scan items and their accomplices
walk out undetected. The check means at least two employees have to
collaborate to steal.

------
idunno246
Walmart tried to move into a dilapidated mall in my neighborhood and everyone
fought it and they couldnt. They moved a mile down the street to a slightly
less wealthy neighborhood, in a dilapidated strip mall. Five years later, the
strip mall with walmart is bustling with business and the other mall is still
mostly empty. Wasted opportunity to get business into the township.

Even though I generally wouldn't shop there, I have no issue with walmart, for
exactly the reasons this author suggests I wouldn't

~~~
Afforess
I agree. I tend to avoid Walmart due to its low quality on a lot of the store
brand goods, but don't actually have any issues with how they run their
business. They aren't exactly hiding that they are a low-cost retailer.

If people have problems with the wages Walmart pays they should stop attacking
Walmart and go deal with the people who _actually_ set the minimum wages: your
congress critter.

~~~
Shivetya
Wal-Mart grocery sells many if not all the same name brands my local grocery
stores do; Publix and Kroger for Atlanta metro. They just sell them so much
cheaper I only buy at the others when I am lazy or there is a BOGO

Going to any of my local Wal-Marts with grocery and it is the most crowded
place of the store. While their clothing sections and miscellaneous house hold
goods sections can be dodge the electronics section, automotive, and garden,
sell many name brands I see elsewhere.

------
tonydiv
For those interested in learning more about Costco, this is the most
informative, fascinating, and mind-blowing report I have ever read:

Understanding Costco by Coriolis Research (namely, Tim Morris).
[http://www.coriolisresearch.com/pdfs/coriolis_understanding_...](http://www.coriolisresearch.com/pdfs/coriolis_understanding_Costco.pdf)

Some mind blowing facts:

1\. They pay their employees $10-$17/hr as opposed to Walmart (as discussed in
the article)

2\. CEO earned 350k in 2012, only twice that of a store manager at Costco

3\. Margins are razor thin. In fact, an employee got yelled at for selling
something at a higher margin (even though all the products were successfully
sold within a week)

4\. ~40% of Californians have a membership

5\. 30% of inventory is at the store within 8 hours

*Note: My employer is a consultant for Costco, and I might be too, so I'm definitely bias, but I love the company.

~~~
nitid_name
> 3\. Margins are razor thin.

I seem to recall reading their markup is <17%, no more than one part in six.

~~~
tonydiv
Costco's gross margin: 12.5%

Safeway's gross margin: 29.6%

Costco's ROIC: 17.8%

Safeway's ROIC: 4.9%

------
orionblastar
The article is Slashdotted, I cannot load it. Let me explain something.

Walmart follows 'classical management' of negative reinforcement and cutting
expenses down to the bone including salaries, benefits, and other stuff. They
are willing to pay executives millions while letting most employees work for
slave wages with little to no benefits to cut down on costs as much as
possible.

Costco follows 'participatory management' in which management gets involved
with the employees and empowers them to make their own decisions. Executives
are not paid millions and their salaries are based on how well the company
does to encourage growth. Employees are paid more so they will be more
productive and with good benefits to take care of health problems and family
problems so they don't interfere with work. If the company is losing money,
they do job cost analysis to see what products and services cost more to
support than the revenue they bring in, and then quality is improved on those
services and products and if it cannot then those products and services get
cut instead of the people and new products and services replace them.

Steve Jobs did this with Apple, cut out products and services that didn't
bring in enough revenue to justify keeping them, cut his own salary as the
iCEO, improved the quality of products and services or come up with new ones
to replace them. Walmart and other 'classic management' companies just don't
understand how to do that so they take it out on the employees instead.

~~~
calbear81
I think we're forgetting that the Walmart customer is not the Costco/Trader
Joe's customer.

I would argue that Walmart pays minimum wages because they can and their
customer base doesn't really value the benefits of paying higher wages and
'participatory management' \- primarily lower turnover and thus more
engaged/invested employees who deliver better service and higher productivity.
Walmart most likely sees their employees as replaceable and the average
Walmart customer is driven by low prices and not great customer service. To
that end, the lower the Walmart cost structure, the more margin they have to
work with to stay competitive (without having to lower CEO salaries, etc. of
course).

Costco and Trader Joe's are known for great customer service and easy return
policies. Based on my observations, people who shop at Costco like to save
money, but it's from a best value angle and not from an absolute cheapest I
can get angle. The Costco consumer has to be willing to shell out an annual
membership fee up front and you're buying in bulk which means you have to be
able to pay for goods you use in the future. Trader Joe's wants to be the
neighborhood store and that means they need happy employees, not employees who
are thinking about how they're going to pay for the knee surgery they badly
need.

I'm probably making broad generalizations of the different customer bases here
but it's what I've personally observed.

~~~
bluedino
>> I think we're forgetting that the Walmart customer is not the Costco/Trader
Joe's customer.

I would say the same for the employees. Your average Walmart worker would
probably be washed-out in a shift or two at Trader Joe's. Everyone at TJ's is
busting their ass, Walmart employees seem to just be standing around doing
nothing but talking to one another.

~~~
calbear81
I wonder if it's because the jobs at TJ are so coveted that employees know if
they don't bust their ass, someone will happily take their position? I feel
the same way about In-N-Out which pays above market, people there always seem
to try a bit harder to be pleasant and helpful.

~~~
omegaham
You get what you pay for. With competitive pricing, you can fire someone and
immediately get a high-quality replacement.

Walmart, on the other hand, seems to scrape the bottom of the barrel with
their employees. As long as the employees show up to work on time and don't
steal merchandise, they're good.

------
netcan
What a solid article.

The number that caught my eye is Revenue/Total Employees. That brings home
some realities of markets. Total revenue in the market is the amount consumers
spend on groceries. Thats more or less constant. Wall Mart's low
revenue/employee ($211k vs $620k) means they employ more people for every
dollar of market share they have. This is an _enormous_ difference. It implies
that every time Costco win $1m in market share from Wal Mart, total employment
drops by 3.1 people.

Aldi (and its slightly upmarket cousin, Liddel) serve a similar market segment
to Wal Mart in Europe. Is suspect they do it with even higher revenue per
employee. These store are all about labour efficiency.

This might be a "be careful what you wish for" scenario for retail workers and
people concerned with wages at the lower rungs. Employers might be able to
afford higher wages, but demand for those wages will go down. In that case,
its hard to imagine wages really improving in the long term. Even if they did,
total employment would be much lower and that would hit the lowest skill
workers hardest. When you pay better wages, you can be choosier.

This may be taking it a little far but.. I think what we see running through
this scenario is an example of how improved efficiency breeds wage inequality.

~~~
wffurr
That's true for all kinds of efficiency, including automation, which is near
and dear to the hearts of Hacker News readers.

The benefits of improved efficiency and automation, as you have pointed out,
skip over employees. Some of them accrue to customers in the form of lower
prices, but largely they accrue to management and shareholders in the form of
increased profits. Costco appears to be the exception that proves the rule,
here.

In theory, efficiency and automation should be a net benefit to society, as we
can then enjoy the same level of goods produced with less labor involved, but
the uneven distribution of benefits causes lots of avoidable suffering on the
part of laid-off workers.

A guaranteed basic income for all (as opposed to means-tested benefits like
welfare and the EITC) would fix a lot of that. It would remove the suffering
from losing your job, and give investors an incentive to automate even more,
as now you would have to pay people quite a bit to motivate them to accept
low-skill menial jobs.

We can fund such a basic income in part by dismantling the welfare state
bureaucracy. No means testing makes distribution much simpler. The rest
through higher taxes on income beyond the basic.

------
MikeCapone
A lot of what I knew about Walmart came from third party sources (activists,
whatever), so I decided to go to a primary and read Sam Walton's book, and I
must say it gave me a new appreciation and understanding for the vast machine
that is Walmart. I highly recommend it:

[http://www.amazon.com/Sam-Walton-Made-In-
America/dp/05535628...](http://www.amazon.com/Sam-Walton-Made-In-
America/dp/0553562835)

~~~
philwelch
Sam Walton has been dead for decades now, and many of his ideas (giving stock
to employees, even store workers) made more sense for the early growth stages
he oversaw than the company that exists today.

~~~
MikeCapone
Indeed. Not sure what that has to do with what I wrote. The history of Walmart
is still the same, and that's what I found so interesting.

~~~
philwelch
The history of Wal-Mart during Sam Walton's life is decades removed from the
company's business practices today.

~~~
MikeCapone
True, but I never said it was a book about today's Walmart, just that I found
it interesting to learn about that company's history and that I recommend the
book.

~~~
MikeCapone
To which I'll add: the past helps better understand the present...

------
kamaal
On the other hand, here in India- My neighbor has just come back from Dubai,
after serving as a cashier at a major retail firm for almost 20 years.

According him, surprisingly enough they make money while customers don't
bother to collect change, or when the cashiers don't have change they just
leave it at them. They keep a track of how much change has collected like that
hourly or at half-day and then they pocket that. The company doesn't lose
money anyway, the customers give away the change like tip. But in the process
these guys make a lot of money.

According to him, the money he makes through the change is actually way more
than his actual salary, nearly like a multiple of his salary. And that is how
he built much of his fortune back here in India.

------
coin
"The average American cashier makes $20,230 a year, a salary that in a single-
earner household would leave a family of four living under the poverty line."

20k is on the low side, but one should still consider their own income before
having children, especially two.

~~~
jusben1369
True. But it goes to a broader social issue. Should a family of 4 where one
parent is employed full time by a large organization be earning below the
poverty line. Was it like that 10/20/40 years ago. Where will it be in another
10 years? What's the impact on our social fabric.

At the micro level as a rationale economic player you in theory should make
that determination. At the macro level it's our job to decide whether we want
one income families to be below the poverty line and what are the broader
implications of that.

~~~
clarky07
Yes. If that person is a cashier at Walmart. The value added by that employee
is simply not that high. They shouldn't get paid more just because we don't
want to be poor. If you only make 20k you shouldn't be having 2 kids. If you
continue to make poor life decisions, the outcome is living below the poverty
line.

Note, that I'm not against helping the poor. Charity is great, and helping
people move up is great. Simply telling Walmart they should pay more for the
same work is stupid. If you want to make more, you should provide more value.

~~~
philangist
> If you continue to make poor life decisions, the outcome is living below the
> poverty line.

What makes you think everyone who's poor got there from making poor decisions?

~~~
mpyne
Just because someone says that A implies B, does not mean that any B you
encounter was a consequence of an A.

That is, making poor life decisions will lead you to poverty, but that doesn't
mean being in poverty meant you made poor life decisions, and that wasn't
claimed AFAICS.

------
cantankerous
_Wal-Mart’s customers expect a very broad array of goods, because they’re a
department store, not a specialty retailer; lots of people rely on Wal-Mart
for their regular weekly shopping. The retailer has tried to cut the number of
SKUs it carries, but ended up having to put them back, because it cost them in
complaints, and sales. That means more labor, and lower profits per square
foot. It also means that when you ask a clerk where something is, he’s likely
to have no idea, because no person could master 108,000 SKUs._

Having done a few years time in retail, I find this part a bit telling. I'm
curious if the author has ever worked in a department store? Many department
stores assign various employees to ....departments in the store. The actual
SKU count you need to mentally juggle in your head is a fraction of what the
entire store carries. Increasing the number of employees in a department and
paying them better should give you a better knowledge on the floor of where
something is if only because customers can find a department member. In my
Wal-Mart it seems like you'd be lucky to find a department member in any
particular department, except maybe automotive or electronics.

Economic realities notwithstanding about where the money comes from to hire
more employees or pay them more of course.

~~~
tanzam75
She uses the term "department store" incorrectly.

She means "hypermarket," where groceries are sold alongside general
merchandise.

~~~
cantankerous
Perhaps so, but still. Wal-Mart segments its departments like a department
store would. Groceries are usually on one side of the store. Outdoor and auto
are usually in a corner near each other. Electronics is its own thing. Home
Improvement, Pet, Beauty, Pharma, Household, Crafts...they're all segmented by
where their assigned shelf-space is. Each one has folks that are in some way
assigned to it. This is my point.

~~~
Zikes
Segmentation at the end point doesn't necessarily mean that those 100,000+
SKUs under one roof isn't a lot. There are many places in the retail
operations process where it's still a very big deal, including shipping and
receiving, merchandise assortment planning, and departmental space planning.
Additionally, the departments tend to be quite large, at times almost a store
themselves. Whereas an employee working at a Best Buy or Circuit City could
specialize in certain categories of electronics, a Walmart employee would have
to be knowledgeable about all categories.

------
SeanLuke
Through ambiguous verbage, this author very carefully skirts an unfortunate
fact which ruins his argument. And that is: Trader Joe's has a very high
number of employees per square foot. TJs is swarming with employees. They're
trained to do every task and can fill in for one another. My local TJs, a
microscopic one and the smallest in DC by far, usually has over 15 employees,
often 20, day and night. I know: I counted them.

I think that this guy is saying that Wal-Mart can't do what Costco does
because it has more SKUs and thus a higher density of employees. But TJ's
density is much higher still, and it pays like Costco does.

~~~
enoch_r
The (female) author's point isn't that "Wal-Mart can't do what Costco does
because it has more SKUs and thus a higher density of employees." It's that
Wal-Mart, Costco, and TJ's have _so many differences_ on _so many axes_ that
it is quite silly to make naive comparisons between their level of employee
compensation while ignoring everything else that makes them different.

I find this example particularly baffling, as one visit to TJ's should be all
one needs to recognize that it's not even in the same category as a store like
Wal-Mart.

------
onoj
I have heard of this journalist before. Apart from the absolute lack of an
explanation as to WHY Walmart cannot pay higher wages (spoiler - it's
complicated!)

also, I find the link in the S.H.A.M.E. project of interest.

[http://shameproject.com/profile/megan-
mcardle/](http://shameproject.com/profile/megan-mcardle/)

~~~
jusben1369
Meh. Either her content is substantially right or it's substantially wrong.
Let's just debunk her theories if we don't believe her vs personally attacking
her. This "She's a conservative activist from the heart of Koch!" is no
different (or less offensive) than "She's a bleeding heart liberal from
Berkeley!"

~~~
onoj
There was a lot of content, but the premise of the article - that it would
explain why Walmart paid less than Costco, was missing.

From that I wondered if the article itself was just some form of PR or
politically motivated rather than unbiased journalism.

------
vondur
Except that WinCo has been expanding rapidly and directly competing against
Wal-Mart. They also pay their employees more than Wal-Mart. They are only a
grocery store, but they are competing.

[http://business.time.com/2013/08/07/meet-the-low-key-low-
cos...](http://business.time.com/2013/08/07/meet-the-low-key-low-cost-grocery-
chain-being-called-wal-marts-worst-nightmare/)

------
zwieback
Well written article, enjoyed it although I also noticed the much-higher
margin Walmart has.

It's very obvious that Walmart allows less wealthy people to buy more.
Paradoxically, the very people suffering from stagnant blue-collar wages are
Walmart's customers.

------
bsbechtel
I'd be interested in seeing how the distribution of pay for all employees,
through a Gini coefficient or other means, stacks up for Walmart vs Costco.

------
RandyH
Is this pretty much the market speaking and saying that Wal-Mart has a crumby
business? Especially factoring in that a lot of people couldn't even work
there without government subsidies in the form of food stamps, etc.

[http://www.motherjones.com/mojo/2013/06/report-walmart-
force...](http://www.motherjones.com/mojo/2013/06/report-walmart-forces-
employees-dole-taxpayers)

~~~
twoodfin
I don't get this "subsidy" argument. Bob pays $200 for his rent, and $150 for
groceries. He applied for a job at Costco and was turned down, but Walmart
offered him a job so he took it.

Without government benefits, he couldn't afford his rent and he couldn't
afford his groceries. Without his job at Walmart, he'd be eligible for even
more benefits. But somehow it's _Walmart_ that's being subsidized, and not his
grocer or his landlord? Not to mention Costco, who's paying him $0, while
Walmart pays him something, at least.

~~~
iopq
if not for government programs, nobody would work at Walmart they would
literally not be able to afford to work there, so they wouldn't even accept
the job if offered because it wouldn't pay their expenses since the
opportunity cost would be too great

a few retirees or people living with parents would work there, but not enough
to fill out their work force this is because wages for unskilled labor tend to
approach the minimum you have to pay for people to live and since the
government is footing the bill to reduce that minimum to very little, Walmart
can get away with paying very little

if government decided to take away all benefits for people currently employed,
Walmart would have to raise their wages because the workers would quit in
droves to sit on welfare instead

~~~
yummyfajitas
_if not for government programs, nobody would work at Walmart...they wouldn 't
even accept the job if offered...opportunity cost would be too great_

Could you explain, ideally by using numbers (either real or example) to
illustrate your argument? Something along the lines of:

No government subsidies, no job at walmart: earnings + unearned income = $x

No govt subsidies, job at walmart: earnings + unearned income = $y

etc.

------
jpitz
The size of the SKU assortment has such a profound impact on so very many
areas of the business, I would venture to say that if two retailers don't have
a comparably sized SKU assortment, they're well-nigh incomparable.

------
mbesto
Reminds me of the paradox of choice -
[http://en.wikipedia.org/wiki/The_Paradox_of_Choice:_Why_More...](http://en.wikipedia.org/wiki/The_Paradox_of_Choice:_Why_More_Is_Less)

------
marincounty
1\. Costco dropped the "absolute satisfaction guarantee" on All of their
products.

2\. If you want to retun something; you need to talk with the Angry Manager.

3\. Now this was fine and dandy with electronics, but it's a whole other story
with grey market high end watches.

4\. I try to pass this information along whenever I can.

5\. I only use Costco for prescriptions. I try to use someone else's card to
by toilet paper.

6\. Costco used to be great, but they need smart senior management. I don't
think you can take an angry employee, and increase revenue. I've just seen bad
marketing decisions over the last decade.

~~~
woobar
1\. Not true: We guarantee your satisfaction on every product we sell with a
full refund. The following must be returned within 90 days of purchase for a
refund: televisions, projectors, computers, cameras, camcorders, touch screen
tablets, MP3 players and cellular phones. [1]

2\. Not true. Regular folks at CS desk usually ask only one question:
"Anything wrong with it?". You refund does not affected by the answer.

4\. Don't spread FUD.

[1] [http://www.costco.com/membership-
information.html](http://www.costco.com/membership-information.html)

------
mncolinlee
> Some stores cannot thrive unless they are within SHORT drives of many
> customers.

My prediction is that within ten years, you will be able to tell the success
of upmarket stores by the number of electric car chargers in front of them.
The wealthy has always found ways to reduce their costs in ways that poorer
people cannot easily duplicate, like reduced banking fees to draw their
business.

------
eloisant
There is probably an other reason, the opposite of why Ford paid higher wages
"so employees can afford his cars".

Well, Wallmart employees are so poor they are forced to shop at Wallmart. If
they got higher wages, they would probably shop at Trader's Joe or Wholefoods.

By keeping poor people poor, they actually increase their customer base.

------
andrewflnr
Um, where are the actual numbers of SKUs at Walmart and Costco? She implies
they're in the graphic, but they're not. She mentions 108,000 SKUs at Walmart
further down, but I have no idea what it is at Costco, except that it's less
than 108,000.

------
ebbv
As she links in the post, she wrote basically this same article almost a year
ago. Why are we rehashing it?

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iopq
that means they can afford to pay their workers around 3,000 more a year and
their profit margins will the be the same as costco's

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LekkoscPiwa
The minimal wage that is mostly what is paid in WalMart and is about $15,000 a
year. Let's put it in historical perspective. In 1969 the minimal wage was
$1.60. And in 1969 the price of ounce of silver was about $1.70.

In other words 40 years ago the minimal wage in the USA was about $22 USD
using today's silver price as an inflation indicator. Using 2013 data 22.00
USD is on par with average American hourly pay. This what was the minimal wage
of 1969 became an average pay in 2013. So if you ever wonder why your grandad
working single simple job could support his family with stay at home wife, 3
or 4 kids, have vacation house and literally no debt – that's why. The average
pay is 3 times lower today than it was 40 years ago when the real money – gold
and silver – are used as an indicator. Of course some will point out to
believe that gold and silver prices are in the bubble territory and that's why
my numbers don't make any sense.

The problem with that reasoning is that gold is not experiencing bubble
pricing. How do I know that? Because gold mining cost is at $1,200 with gold
price merely covering it at $1,400. Bubbles are experienced in assets that
sell by multiples of their real price, not the ones that are sold basically at
the production cost. The staggering truth is that the current gold price
simply reflects the high cost of living in the US today. The only correct
conclusion seems to be that an average American worker is as poor today as
minimal wage worker was 40 years ago.

No wonder fast-food strikes set for cities nationwide:
[http://www.seattlepi.com/news/us/article/Fast-food-
strikes-s...](http://www.seattlepi.com/news/us/article/Fast-food-strikes-set-
for-cities-nationwide-4770082.php)

~~~
mason240
>when the real money – gold and silver – are used as an indicator.

The basis of your argument is wrong. An individual commodity like gold can't
be used as indicator of economic levels. It is just as affected by supply and
demand as any other commodity.

This is similar to when people try to compare the price of gas at the pump to
the economy as a whole ("back when I was kid, gas was 10 cents a gallon, and
now it's $3.50! Why aren't wages 35 times higher!").

~~~
LekkoscPiwa
Gold isn't commodity - why the central banks of the world are storing it? And
not oil. And not steel. And not coal? Because gold still functions as _money_
in people's minds. This includes central bankers. And gold historically, for
the past 5,000 years, has been used as an indicator of economic levels. One of
the good reasons is that you can't have a Government play with it. Did you
know that if the same formula for accounting for inflation was used today as
was used in Reagan years the US official inflation would be at 10% ? That's
right, if we just used the official Government formula of counting inflation
from 1980s we are at 10% today. While they try to push this propaganda it is
non-existent.

I love your quote: "back when I was kid, gas was 10 cents a gallon, and now
it's $3.50! Why aren't wages 35 times higher!"

I think mine is better: "back when I was kid, gas was 10 _silver_ cents a
gallon, and now it's still 10 _silver_ cents! Why wages are 3 times lower in
silver terms!"

Because if you google it, you'll know that barrel of oil price in real money
has been the same for the past 50 years. About 1/15 price of ounce of gold.
I.e. 1 ounce of gold buys you 15 barrels of oil. With +/\- 5 barrels deviation
depending on the market cycle. But the average is 15. Your quote presents
exactly why gold is much better indication of inflation than some government
burocrats and their ever-changing formulas to please the Government.

