[lbo-talk] Walmart and Costco

snitsnat snitilicious at tampabay.rr.com
Wed May 4 19:22:09 PDT 2005


At 09:34 PM 5/4/2005, Marvin Gandall wrote:
>>Wall Street Journal - March 26, 2004
>>
>>Costco's Dilemma: Be Kind
>> To Its Workers, or Wall Street?
>>
>>By ANN ZIMMERMAN
>>Staff Reporter of THE WALL STREET JOURNAL>
>
>>...Costco says its higher pay boosts loyalty: Its employee turnover rate
>>is 24% a year. Wal-Mart's overall employee turnover rate is 50%,
>>about in line with the retail-industry average. Wal-Mart doesn't
>>break out turnover rates at Sam's Club. High turnover creates added
>>expense for retailers because new workers have to be trained and are
>>not as efficient.
>---------------------------------
>More information from Business Week below. I'm surprised that the higher
>retention rate and productivity at Costco actually makes as much
>difference as reported at this skill level, where retraining costs can't be
>that high, and the largely passive sales force is mostly there to help
>customers find products.

Rambling thoughts: There aren't that many people out on the floor for one thing. The workers are stockers who drive forklifts to stock shelves, work with equipment in the back, especially computerized product tracking equipment, others work the deli, bakery, and butcher shop. Safety training is probably their biggest expense -- back injuries, how to avoid spills, etc.

The other problem is that, for retail establishments, the biggest turnover occurs during the first few months of employment -- around 45% (varies by type of store). So, they never recoup their training costs over the long-term, just keep cycling through a significant chunk of employees.

Plus, a high churn rate is associated with high shrinkage -- 50% of loss is due to employee theft. Oh, and the cost of turnover isn't just in the training, but in the hiring. Go apply for a job at Home Depot and see if you can pass their personality test?! (TIP: if you say that you never stole anything from an employer, you won't get an interview.)

In the case of a warehouse, the theft is usually a bigger enterprise than just pocketing the merch. It involves things like lying about what was checked in and out, whether goods are really damaged, working in cohoots with truck drivers to silenty move stuff off the latest truckload and onto another truck which then carts it off to wherever -- with kickback to the manager, usually.

I don't know what the costs for warehouse stores is, but I have an internal report from a client which says that the retail/grocery industry typical costs range from $4k - $6k.



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