The Adventures of Accordion Guy in the 21st Century

[via Fark]

Okay: I’ll admit that during my move, I bought some replacement stuff at Wal-Mart. I didn’t want to go through the hassle of buying a Costco membership just yet and I needed a good deal on a few hundred bucks’ worth of replacement items such as a microwave oven (my old place had one built in, my new one doesn’t), a few replacement pots and pans to tide me over until the wedding presents come in, some closet organizers, a new king size comforter, and so on. I’m trying to maximize my dollar, especially in light of the money I spent on movers and my newly-doubled rent (at least until Wendy is eligible to work here).

Shopping at Wal-Mart is something I try not to do often, as they treat almost everyone — customers, employees and even their own suppliers — like mere links in a “value chain”. The only true human beings in the system are its shareholders; the rest of us are merely there to contribute to the share price.

(I could’ve saved on money by getting a bunch of friends to help for “free”, but that invariably leads to furniture damage, takes longer and is hard to do in the middle of a Wednesday.)

Costco, on the other hand, does a much better job. The staff are generally nicer, the selection of stuff is generally better, and the employees are considerably more helpful, probably because they’re better paid. So much better paid (42% more than Sam’s Club employees), that some Wall Street analysts are annoyed.

From a New York Times profile on Jim Sinegal, Costco’s CEO:

Combining high quality with stunningly low prices, the shirts appeal to upscale customers — and epitomize why some retail analysts say Sinegal just might be America’s shrewdest merchant since Sam Walton, the founder of Wal-Mart.

But not everyone is happy with Costco’s business strategy. Some Wall Street analysts assert that Sinegal is overly generous not only to Costco’s customers but to its workers as well.

Costco’s average pay, for example, is $17 an hour, 42 percent higher than its fiercest rival, Wal-Mart’s Sam’s Club. And Costco’s health plan makes those at many other retailers look Scroogish. One analyst, Bill Dreher of Deutsche Bank, complained last year that at Costco “it’s better to be an employee or a customer than a shareholder.”

A quick note to parents: If you ask your kid what s/he wants to be when s/he grows up, and s/he replies “An investment analyst!”, feel free to smack them really hard and then say “That was from Uncle Joey, who’d rather you actually CREATED wealth rather than merely shuffling it around.”

But I digress.

Sinegal begs to differ. He rejects Wall Street’s assumption that to succeed in discount retailing, companies must pay poorly and skimp on benefits, or must ratchet up prices to meet Wall Street’s profit demands.

Good wages and benefits are why Costco has extremely low rates of turnover and theft by employees, he said. And Costco’s customers, who are more affluent than other warehouse store shoppers, stay loyal because they like the fact that low prices do not come at the workers’ expense.

“This is not altruistic,” he said. “This is good business.”

Sinegal, whose father was a coal miner and steelworker, gave a simple explanation.

“On Wall Street, they’re in the business of making money between now and next Thursday,” he said. “I don’t say that with any bitterness, but we can’t take that view. We want to build a company that will still be here 50 and 60 years from now.”

If shareholders mind Sinegal’s philosophy, it is not obvious: Costco’s stock price has risen more than 10 percent in the last 12 months, while Wal-Mart’s has slipped 5 percent.

Also notable is the fact that Sinegal’s salary is a mere $350,000, which is small considering he makes less than a tenth of other CEOs whose businesses are performing on par with Costco. He says “I just think that if you’re going to try to run an organization that’s very cost-conscious, then you can’t have those disparities. Having an individual who is making 100 or 200 or 300 times more than the average person working on the floor is wrong.”

When I next do some big-box shopping (and yes, there are times it’s the best thing to do), it’s going to be at Costco.