August 12, 2004

Bush & Wal-Mart vs. Kerry & Costco

Bush:Wal-Mart as Kerry:Costco
There was an entertaining article by Daniel Gross on Slate.com the past few days about how Bush is to Wal-Mart, as Kerry is to Costco - i.e., the demographics are similar and the customers of each chain would tend to vote for their preferred candidate. Now, I don't know if I buy it, but it's an interesting crossover between competition in politics and competition in business so I thought it a worthwhile read:
    Like today's Democratic Party, Costco favors highly trafficked urban and edge-city locations—it has three stores in New York City. And it caters to a decidedly upscale crowd. As John Helyar reported in this excellent Fortune profile, the average salary of a Costco member is $95,333. The company's merchandise mix reflects the fact that its customers shop at discounters by choice, not by necessity. They're New Luxury suckers who like to save on staples, more Jean Chardonnay than Joe Six-Pack. As Helyar notes: "Costco is the U.S.'s biggest seller of fine wines ($600 million a year)." (Needless to say, "Moneybox" has been a member since 2000.)

    Costco also has the sort of labor policy that would bring a smile to Barbara Ehrenreich's face. Pay starts at $10 an hour. About one in six employees is represented by a union, and workers receive nice health benefits. Sinegal has a non-zero-sum view of employee relations. Give people good jobs at good wages, and they'll be more likely to work harder, less likely to leave, and less likely to steal. As Helyar reported, Costco's turnover "is a third of the retail industry average of 64%," and "shrinkage"—the amount of inventory lost to theft—"is about 13% of the industry norm."

    On the right: Wal-Mart Stores, Inc. Founded in Arkansas (a blue-turned-red state), it grew by spreading into the adjacent South and Great Plains. Like today's Republican Party, it focuses intensely on rural areas and generally avoids cities. (Republican conventioneers won't be able to shop at a Wal-Mart when they visit New York City.) As this Bloomberg story notes, "Sixty-seven percent of Wal-Mart's stores are in the 30 states that voted for Bush and Cheney in 2000."

    The company's labor policies are state-of-the-art, for the 1890s. It has been investigated for hiring contractors who allegedly hired illegal aliens to clean Wal-Mart stores and for locking them inside overnight. (One wonders if the Wal-Mart employees who in April were bused in to hear Vice President Dick Cheney sing the company's praises at Wal-Mart's headquarters were similarly confined.) In June, a federal judge certified a class-action lawsuit filed on behalf of female Wal-Mart employees who claimed discrimination. The average wage at Wal-Mart, which has no unions and bitterly opposes raising the minimum wage, is lower than Costco's lowest wage. Turnover at Wal-Mart, according to the Economist, is 44 percent, meaning it "has to hire an astonishing 600,000 people every year simply to stay at its current size."

Costco's customers seem to have more disposable income at least... maybe it's an unintended effect of Bush's tax cut?

    Consumers vote by shopping. And so far this year, they're voting more for Costco than Wal-Mart, yet another illustration of the Two Americas shopping theme. Costco's customers plainly have cash to spend. For the four weeks ended Aug. 1, Costco's same-store U.S. sales rose 9 percent; in the 48 weeks ended Aug. 1, they were up an impressive 10 percent. At Wal-Mart, the registers haven't been ringing quite so loudly. In its most recent four-week sales period, same-store sales rose a meager 2.4 percent. For August, Wal-Mart sees same-store growth of between 2 percent to 4 percent—about the same growth rate as the economy, if not slower.

I must confess, I've never been to a Costco before, but then I've led a sheltered life. Still, I've got some pretty rabidly anti-Bush family that are some of Wal-Mart's biggest cheerleaders... but then, we Midwesterners can be cheapskates sometimes too.

- Arik

Posted by Arik Johnson at August 12, 2004 10:26 AM | TrackBack