Taylor's Bits

Strap yourself in...this is going to be a doozy. Put your thinking cap on.

As I was reading the article about a new Sam's Club (Wal-Mart's membership store) going in next to Costco on East Sprague here in Spokane, several things popped into my head as I became more informed about the 'philosphies' of these two businesses. Of course, I'm going to share those nuggets.

The first thing I learned (I'm ashamed to say) is that I didn't know that Sam's Club was a membership store. I did know it was owned by the evil empire Wal-Mart, but didn't know about it's similarity to Costco in that you need to pay an annual membership fee to shop there.

OK, now to the two different businesses and their 'philosophies'. The paper cites several sources of these figures. You'll have to trust that I'm not re-copying the facts here falsely.

	Wal-Mart	Costco
Avg. Employee Salary	$9.86 - $11.52	$17
Employees pay avg. of their health care premiums	33%	8%
Employee turnover rate	44%	17%

Now, when I first looked at these numbers, I wasn't at all surprised. I have heard that Costco employees get treated really well. Besides, when you shop there, the people are friendly, they're smiling and you can tell that they work hard. Now, to be fair, I can't remember the last time I ever set foot in a Wal-Mart or Sam's Club (although it might have been back in my college days), so I can't compare. Also, I don't know if the 33% health care number is skewed because many Wal-Mart employees get assistance from states on their health care (yes, from us taxpayers), but that's another post. If you want to learn more about that, go here.

I'll throw some more numbers out at you that compare the two companies' overall fiscal philosophy and then I'll share with you some initial reactions I had and some more facts I dug up.

	Wal-Mart	Costco
Membership Fees	$35-$100	$50-$100
Sales for fiscal 2006	$39.8 billion	$60.2 billion
Number of stores	550	504

Now, believe it or not, the very first thought that went through my head (I'm swearing to Buddha here) was that, "I'll bet Costco supports Democrats" (ha, you knew I'd turn this into a political issue, didn't you?). Now, why do you suppose I say that? Well, here's why. Now, I know I'm not the smartest person in the world and I know that I'm not an economist or politician, nor do I study the economy (like someone I know who will read this...so I'm anxious to hear from you, Will), but my basic understanding is this: Democrats are for the common working family. Republicans are for the shareholders. That may be an over-simplification, but I think that's generally true. I'm not saying good or bad, I'm saying those are the two different economic philosophies.

Anyway, back to the political issue. This is a perfect example of a Democratic vs. Republican Corporate America business model. Costco supports 89% Democrats, while Wal-Mart supports 72% Republican. Sources 1 | 2

While Costco believes in giving their employees a decent wage, which in turn still gives them a nice profit. Wal-Mart wants to increase their bottom line by cutting costs in the employee department still doesn't match the profit that Costco churns out even though they have more stores. Now, my theory on this (now, remember my credentials, above) is that if you have a workforce that is happy at their job and benefits, they will not only do a more efficient job, but they will do it better. Those employees at Wal-Mart don't make as much and don't have as good benefits, so they only work hard enough to not get fired. There's no motivation. Also, they will tend to just work long enough to get experience so they can get a better paying job somewhere else.

So, look at the bottom lines here. Costco made over $20 billion more this year than Sam's Club even though they have 46 less stores. Now, I'm sure there are more factors, I'm not that dumb. But, I think it's noteworthy. I believe there is a connection. Again, two different philosophies at work here. One company takes care of it's employees, turns out a decent profit and continues to grow. The other pays it's employees about 7 - 8 dollars an hour less, plus they have more to pay as far as health benefits and has over double the employee turnover rate.

Washington state has the highest minimum wage in the U.S. People thought that would hurt businesses. The verdict is still out, but it doesn't appear to be. More...

I think I've babbled enough. I would like to hear your comments below.