skip to content

Is Costco Really the 'Anti-Walmart'?

Is Costco Really the 'Anti-Walmart'?

October 27, 2007 —

In recent years, Wall Street has increasingly looked at Wal-Mart’s business plan as the ideal for ‘big box’ companies.  This attitude has caused other major retail corporations to copy Wal-Mart—what BusinessWeek called ‘Wal-Martization’—in order to lower labor costs and increase profit margin. Yet, in July 2005, the New York Times ran a story with the title: ‘How Costco Became the Anti-Wal-Mart.’ According to the Times, Costco's average pay is $17 an hour, 42 percent higher than its fiercest rival, Sam's Club.  Yet, some argue that Costco is really no better than other ‘big box’ companies, regardless of their treatment of employees. 

At Costco, no branded item can be marked up by more than 14 percent, and no private-label item by more than 15 percent. In contrast, supermarkets generally mark up merchandise by 25 percent, and department stores by 50 percent or more. A typical Costco store stocks 4,000 types of items, including perhaps just four toothpaste brands, while a Wal-Mart typically stocks more than 100,000 types of items and may carry 60 sizes and brands of toothpastes. Narrowing the number of options increases the sales volume of each, allowing Costco to squeeze deeper and deeper bulk discounts from suppliers.

Besides paying considerably more than competitors, Costco contributes generously to its workers' 401(k) plans, starting with 3 percent of salary the second year and rising to 9 percent after 25 years. Costco also has not shut out unions, as some of its rivals have. The Teamsters union, for example, represents 14,000 of Costco's 113,000 employees.

According to many critics of the ‘big box’ economy, Costco is just as guilty as Wal-Mart and others at changing the landscape of many local economies, driving out independent businesses and disrupting local communities. And yet, in today's economy, just how applicable is the Costco model to the rest of the retail business?  Costco has a particular niche: Selling to upscale customers.  Like Wal-Mart, Costco is very aggressive with its suppliers and many question whether the Costco model would work if the company had to cater to shoppers who were more price-sensitive?   Or would the competition from Wal-Mart and its knock-offs force it to adopt similar labor policies?

Comment on this article:

I'm a Costco Employee. I

Submitted by Anonymous on June 14, 2008 - 23:01.

I'm a Costco Employee. I agree that Costco's pay and benefits are better than Walmart's, though not so much better than some other retailers.
I've worked at Costco for over 20 years and am topped out on the pay scale. My wife works at Safeway (for 5 years now) and although started at only 8 dollars an hour she has now closed the gap on my pay and only makes a few dollars less than me.
However 70 dollars is deducted from my paycheck per two-week period for health care costs compared to the 36 dollars for my wife's health care costs. Which closes the gap a bit more, and her benefits with the retail workers union are better than what I get at twice the cost (of course we're non-union).
Another thing I might note is although Costco is a bit better in their pay scale than other retailers they are worst in other areas. Our company (to keep in line with it's low overhead philosophy) side steps labor laws.

Example one: Meal and break period laws.

In Washington breaks are required at every 2 hour point of a shift and lunches are to be given no later than 5 hours after an employee's shift starts or it becomes a paid lunch instead of an unpaid lunch. A lunch must also become a paid lunch if the employee is required to perform a task while on lunch. Our lunches used to get spliced up because the Supervisors would pull us from the break room if it got busy and require us to come back out to work, then make us finish our lunches later. Of course we had to write in our lunch on our time card as if it were an uninterrupted half hour. Now we have a time clock so they can't pull that trick anymore. But if they could I'm sure they would.
Until a year ago we were routinely given late breaks and lunches. Often we would have to wait till the last hour of our shift and take all our breaks and lunches in one lump, meaning we were required to wait until after 7.5 hours into our shift to get our first break. Not once did they ever pay for our lunches. And often we would never even see our last break. For Supervisors on the Frontend, not getting a last break was very common.
About a year ago (most likely due to a lawsuit or L&I complaint) they started following the law more closely. Breaks are given closer to when they should, yet they still won't pay for lunches if the employee gets it after 5 hours. But they will write them up for not taking it before, even if the employee has no control over when they can take their lunch (Most of us have to wait for a Supervisor to allows us to take it).

Example Two: Uniform Laws

Washington forbids companies from charging employees for parts of their uniform that identifies the company.
Costco charges their employees $1 for name badges which displays the company logo on the top portion of the name badge.
Since these name badges only cost about 5 or 10 cents a piece that means on top of violating state law they are also trying to profit from this practice.
It's fairly easy for a name badge to come unclipped from our shirt while packing orders at the register due to lifting products up against our chest. Usually they just fall on the floor but sometimes it might fall somewhere into the boxes we are packing customers products into and then they are gone for good. Requiring us to fork up another dollar to buy another name badge in turn giving Costco a chance to make another 900% to 1800% profit on top of it.

Example three: Falsifying injury claims.

Costco has a "Transfer Policy" meaning ALL items are required to be lifted from one cart to a separate cart and at our store they've added that it must be performed with a sense of urgency meaning at a very fast pace. Not a good request with the weight and package designs of our products and the fact that our carts and flatbeds weren't design for this type of activity.
When an employee on the frontend gets a back injury or such from having to move a customers items from the cart they shopped with to a separate cart, their Doctor is provided with a Job Analysis Document stating the physical demands of that employees position. The physical demand document provided to the Doctor very much downplays what the employee actually faces during an 8 hour shift.
Washington State defines frequency keys of physical demand as followed:

N=Never (0 hours of shift involve this activity)
O=Occationally (less than 2.5 hours of shift involves this activity)
F=Frequently (2.5 to 5 hours of shift involve this activity)
C=Continuously (Over 5 hours of shift involve this activity)

Note: Frontend employees work on the frontend their whole shift. Rarely do we get to perform other less physical duties so everything below is based on a packer being at the register for an eight hour shift.

Costco's physical demand document for injury claims states:

Standing (O) - Go to your nearest Costco and see how many chairs are provided for the employees at the registers to sit on for the 5 hours of their shift that Costco claims the employees are NOT standing. This should state continuously.

Bending (F) - With Costco's oversized and deep carts it is impossible not to bend the back to pull out the heavier items from the upper portion of the cart to be placed into a separate cart. Plus it is a tasked performed constantly during a packers 8 hour shift. This should state continuously.

Kneeling (N) - Many of the heavier items customers purchase are left on the lower portion of the cart which is about 4 inches from the ground. How can you move these types of items without kneeling?
At our store we are required to place the customers cart next to the Cashier for scanning and the transfer cart at the far end of the register which means we have to kneel down to retrieve the oversized 40 lbs case of water / firelogs / dogfood or whatever from one cart, stand up with it, then walk the six feet to another cart while avoiding being hit by the customer or manager who is using our workspace as a walk-through and then kneel back down to the transfer cart to place the item in it. Having the transfer cart at the far end of the register means the packer must lift the items solo since the cashier need to stay at the center portion of the register. This should state continuously.


Costco States...
10 lbs - below waist (O)
waist/chest (F)
above shoulder (O)
(All Should state Continuously)

11-20 lbs - below waist (F)
waist/chest (F)
above shoulder (O)
(All Should state Continuously)

21-50 lbs - below waist (O)
waist/chest (O)
above shoulder (O)
(All Should state Continuously)

* Costco's oversized drink packages, dogfoods and other such items are in this weight range and exist in the
majority of the 300-350 orders each packer must handle in a days work.

51-75 lbs - below waist (N)
waist/chest (N)
above shoulder (N)
(All Should state Continuously)

* Costco states that we can ask for permission from a Supervisor if we can leave items in this weight range without
having to transfer them, but since it involves a yes or no answer it can still be required depending on who is asked
also we routinely must get heavy items off the sales floor for customers who didn't want to lift the items themselves.
So this also should state Continuously.

75-100 lbs - below waist (N)
waist/chest (N)
above shoulder (N)

* Part of a packers essential duties is to retrieve large items for customers from the sales floor, such as generators
(350 lbs) / exercise treadmills (450 lbs) etc. To be honest items in the 200 plus weight range are lifted less often
except when one of these items are offered on a coupon or during the time of the year when we are stocking a lot of
furniture or summer items (Large playsets / large pools).
However, due to Costco's habit of stacking heavy items with forklifts on top of each other. It can be very hazardous
when the packers on the day shift need to bring these items down by hand since forklifts are not allowed to be used
during opening hours.
Just recently another packer and I Had to retrieve a 450 lbs treadmill for a customer. We were the only two
available that were capable of lifting these types of items that day due to other packers having existing injuries and
girls are not usually picked for this type of lifting (not because of a policy by Costco, but because of a mutual policy
between frontend personnel).
The treadmills were stacked 4 high meaning the one we had to bring down from the top was above our heads. We
tried to see if we could get a forklift out on the floor to lower it down with but were told no. So this should still state
continuously since it IS a part of our duties during our 8 hour shift. Also the weight range should state 75-500 lbs
instead of 75-100 lbs.

There are even more falsified statements in their physical demands document, but I think you can get the point with these.
Since I began working for Costco I had been continuously told about our "Transfer Policy" but have never actually seen it on paper like I have with all our other policies. One day I approached our Assistant Warehouse Manager and asked him to provide me with a copy of this policy. I was told it wasn't a real policy but just a memo that Corporate sends to Warehouse Managers to try and get them to push it. To me that rings of deniability on Corporate's part if anyone who was injured real bad tried to sue the company.
Not all warehouse managers will require this "transfer policy" so these physical demands might be true for the warehouses that don't push it. But for those of us that do we should not have to share this document since it provides our doctors with false information when determining whether we should be put on light duty or disability or for how long.
They claim we need to move all this stuff so we don't miss anything, but I was able to get our regional manager to admit it was more of a scare tactic to prevent theft. If customers saw us moving everything they would be less likely to steal from us. That wouldn't be so bad if they also did THEIR part to prevent theft. If I should be expected to risk injury (possibly permanent injury) to prevent theft then at least the company could risk a little of their budget to install electronic electronic theft prevention system at the front doors. But if you ask them why we don't they will tell you that Costco can't afford it. HUH? But I can afford to lose by back, knees or shoulder?
In contrast, at Safeway where my wife works they are very serious about safety. In the last year they've had 1 injury compared to our stores rate of an injury every 7 to 12 days. Granted they don't allow their items to be so large as ours but even if they did I'm fairly positive they wouldn't be inconsiderate enough to their workers as to have a "transfer policy" like Costco and then threaten write-ups and termination if not followed.
My wife has never had to deal with late breaks or lunches. Never been required to pay for parts of her uniform that are illegal for her to pay for.
An interesting thing to do would be to go to a local Costco that pushes Jim Sinegal's "transfer policy". Sit somewhere for quite a while and watch the type of stuff they are required to move and the manner in which they are required to move them. You might have to wait until a manager comes out of their office before you see them following the "policy" because most Frontend employees will try to get away without transferring when not watched. You have to. The body just can't physically take the type of punishment Jim asks for, 8 hours a day, 5 or 6 days a week.
But if you do have a Costco around that forces a transfer policy, watch the activity then repeat to yourself parts of Costco's Code of Ethics, "We pledge to provide our employees with a safe and healthy work environment." and "We pledge to obey all laws".
Although we pay better and have better benefits than Walmart at least they're not breaking any laws by doing so, they're just being cheap. Do they require their employees to risk their livelihoods in order to keep from buying a theft prevention system. Do they also falsify injury claims or for that matter even have the same frequency of injuries?
Here's another little interesting bit of info. Recently we suddenly were without our Bonita bananas in our warehouses. Customers kept asking us why but no information was provided to us. We asked management but they claimed not to know. A few days later they posted signs on all the registers stating the reason was due to inclement weather conditions in Ecuador. I actually believed this for a while till I began noticing other businesses had bananas that came from other banana suppliers in Ecuador. After doing a web search of "Costco Bonita" I discovered the real reason was we were pressured to stop purchasing from Bonita due to poor worker conditions at their company. So apparently they have no hesitations about feeding the public a pack of lies. In my opinion Costco's Code of Ethics is just another pack of lies.
Don't get me wrong I still enjoy working at Costco, just not FOR Costco. My co-workers are a blast to work with, it's just the upper management levels and their reluctance to be the company they claim to be that makes me and others want to find ways out of the company. Lots will tolerate it because they don't want to loose the income. However, I myself am not staying for the money. I don't worship money like a lot of people and don't really have desires to go out and buy a lot of things I don't really need. So I would have no problem leaving for a lesser paying job when the time come. I've stayed because I put people's health and safety above money and would like to leave my co-workers knowing that they are getting the treatment Mr. Sinegal says he gives them, but for Costco, it's money (overhead costs) over people . I would like to see this company change it's way before I make MY move to depart Costco. However, I've tried every tactic I could think of short of filing official complaints with the government to get this business to obey the law and care more for it's workers, but they are very stubborn in their ways (a real above the law attitude).
It would be very easy for Costco to get the money they claims they don't have to improve safety for it's workers by doing away with their ridiculous return policy of "bought it 10 or 20 years ago? Go ahead bring it back. We'll give you a FULL refund and just eat the cost".
They could change it to 1 year and it would still be very generous compared to everyone else. And we would have enough money for safer carts to transfer item from and to. Ladders that don't sway from side to side when your standing on the top level etc, etc. And yes, possibly even an electronic theft prevention system for the front door.
Maybe someone should write a story called "Safeway: the Anti-Costco" and base it on the differences between the two companies willingness to obey the law and provide their workers with a safe work environment.
Costco does have it's own skeletons in it's closet, they're just better at keeping the door closed.

Buy It

Don't Buy It

  • Racial profiling and discrimination
  • Maker of violent anti-social video games
  • Numerous ethical problems with largest maker of household products in U.S.
  • Unethical marketing of baby formula in developing nations
  • Processed meat sold as 'natural' food. Union-buster.