Costco CEO Craig Jelinek Leads the Cheapest, Happiest Company in the World
businessweek.com
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I'm not sure how the focus on pay & conditions translates across the pacific however; our national minimum wage for casual workers is already AU$20.34 (US$18.54) and we have universal healthcare. So I'm guessing the relative benefits of working for Costco are lower as compared to in the USA.
The only things we really buy from the supermarket are week to week things like meat etc.
Most supermarkets (Coles, Woolworths/Safeway) employed a lot of cheap, casual or part time, high turnover staff. Award rates (Australia complicated alternative to minimum wages) are lower for younger employees (up to 21 yrs) so they employed a lot of high schoolers. The jobs were very narrow. Checkout chicks don't leave the counter. When no one is waiting, they need to pretend to be cleaning their workstations.
Aldi paid slightly above award. They preferred to hire adults. They preferred to hire for the long term. They had raises & advancement opportunities. They kept costs down by with efficiency instead of low wages. Intelligent efficiency with brains in use at all levels. Employees are far more independent. If there are long queues, they open another counter. If not, the stock shelve. If they have time, they take stock counts or do something else. The job satisfaction is way way higher.
The upshot of all this is that they can run stores with far fewer employees. A lot of other things go into this (store layouts, fewer product choices, display-in-bulk packaging), but better treated, more empowered employees is a big one. Hourly rates is just a part of the picture.
Ha! Only 40km? I know many people who drive ~300km to get to a Costco. Hell, several people I know refuse to move to a city without easy access to Costco -- even if it means not taking a promotion. That's some serious store loyalty there. I love Costco, but not that much!
We'll find some item that we like there only for it to be completely gone 3 months later and never to return. While at another local Costco they have palettes full of it. 3 months after that the product will disappear from all Costcos and a different, but better one will show up everywhere. Things like Wine selection will also differ quite a bit from store to store.
That or there will be sudden changes to the packaging of staple items in the store for no real reason. Milk, for example, seems to get a packaging overhaul every year or so.
Either way, even with limited choice, over time the number of products you might buy at a Costco turns out to be quite a few.
Other retailers, on the other hand, are surprisingly more uniform in their product selection. The half dozen Targets in my area offer more or less the same products and fit it all within 1 or 2 master floor layouts.
It's, in a way, a similar value proposition as Starbucks/McDonald's: you trade quality for consistency. The fact that Aisle 17 is for dishwashing and cleaning supplies becomes a core principle of your company.
Wine selection is probably a little easier to explain, given the bizarre maze of the three tier system. Thank god for the 21st Amendment, but the way states handle alcohol distribution makes me thankful for an expansive reading of the Commerce Clause.
Some people have a "favorite detergent". Other people, such as myself, just want something of decent quality, and could not really care less what name is on the container.
For you, Amazon's approach is better, because you're willing to pay more for the specific item you want. For me, that's completely unimportant, so why would I pay more?
The two companies are covering different niches in that respect. Nothing wrong with that. No single company needs to be all things to all people, although I suspect Amazon wants to (and Costco does not).
You're probably right that there's a big market for consumers of "good enough, consistency be damned". But I think a lot of Costco's market is after convenience and "low enough" prices. If Amazon can hit "low enough" prices and a wider, more consistent selection, Costco could be in trouble. Zero trips to the store is better than one, especially when you don't need to supplement Costco with other retailers to cover their gaps.
I'm sure Amazon could cause a lot of trouble for Costco if they can match their prices or come close, but I don't see that happening. I basically buy three categories of products at Costco: frozen food, fruit, and non-perishable bulk items like paper towels or toilet paper. I can't see Amazon ever coming close on the first two, simply because the inherent costs of delivering perishable items to the house are too high. They can pull off Prime because they're delivering items that have no problem being in transit for two days, but I can't see how they could deliver e.g. strawberries for a reasonable price ever. I'd love to be wrong, but I don't see it happening.
1. Go to Costco and purchase as many huge things in bulk as I can. People like to equate 'buying in bulk' with 'pricing', but honestly for me its just as much about the convenience: I don't care about saving $.50 on toilet paper so much as I care about having to buy toilet paper only once a year. I'm picky with some things (like hand soap), but like you said I know Kirkland products are going to be good enough.
2. For everything else, buy off Amazon/Target/TJ's.
One of the cues I'm surprised Costco hasn't taken is subscription-based shopping (as in, I set up a list of X items that I can schedule for a pickup every few months) that would make this process even better. Given the decidedly non-marketing-oriented layout of their stores, I don't think they'd miss the opportunity for up-selling.
I think they're more marketing-oriented than you're suggesting. There's a reason I have to walk by the big-screen TVs every time I walk in to my Costco, and why they hire all those workers (who are contractors, no?) to give out food samples. Come to think of it, at my local store, everything you might want to "browse through", from clothes to books to seasonal stuff, is in the low-shelved center of the store, while the "dependables" are in the back.
I'm sure they make money from the members who buy the same dozen things every time they visit, but I bet they make a lot more from the folks who browse the sample stations and who buy TVs on impulse.
Anyway, that counters my argument about Amazon, since they'll never be able to hand out Bagel Bites!
Club packaging requirements are very particular to how they sell, in large bulk packs directly off pallets or steel racks. Usually the packaging is completely custom to the club, from the product packaging itself to the pallet packing. And no club wants the same as another (if they even stock the same product). This leads to new packaging having all kinds of unforeseen problems that slip through testing; from shifting in transit when using certain trucks, pallet crushing due to stack design, stretch wrap ripping for some reason, sub-optimal presentation when the pallet is thrown on the floor for sale, etc.
The package refresh itself will take the supplier ~6-12 months (unless it's a critical deficiency in the packaging), so even if the problems present themselves immediately you're looking at a "yearly" overhaul. And then the cycle repeats itself, when new bugs are introduced (you just can't test for everything that's gonna hit at Club scale sales).
Standard retailers use the same basic packaging styles, even if slightly customized for that client, so most of the 'gotchas' with those have been rooted out and accounted for, so refreshes are much less frequent.
Edit: Unless you were talking about simple label changes. In which case you are correct in there being no real reason beyond the marketing department trying to keep itself employed. Supply chain departments hate it due to the headaches and costs associated with switching over (and writing off unused labels/packaging).
I've generally been impressed by Aldi's ability to maintain a quality shopping experience while maintaining such low prices. Typically in the US, bargain-type stores tend to skimp on things like cleaning, repairs, merchandising/stocking, etc. This isn't really the case with Aldi.
For good treatment of people? Look up Semco.
For strong brand management? Look up Procter & Gamble.
For strong marketing? Look up Nike.
For great engineering? Look up Google.
Ones that are good at all of the above? Very rare!
longer term employees = more knowledgeable = better customer service
some decade walmart and target might get a clue about this
If only I could get back a fraction of the time I've spent searching for products that they moved from one aisle to another.
Good pay + Low prices seems like a difficult combination
I watched a documentary[1] a few months ago wherein it was outlined that the company's former CEO witnessed the rise and fall of several other big-warehouse wholesalers. He noticed that what kept happening was that companies would start with lean margins, capture lots of customers, raise the margins, and collapse as soon as another wholesaler with leaner margins appeared. To avoid that fate, he apparently put a hard cap on Costco's profit margins.
That said, now that Costco's so big, they could theoretically raise their prices and still muscle out competitors. Let's hope that doesn't happen.
If Amazon decides to open "Costozon" will Costco be able to compete?