Thursday, August 17, 2006

Costco vs Wal-Mart - Business Models

Reading about Costco and Jim Sinegal makes one question the Wal-Mart business model even more. Here is an article from the Seattle Weekly that I came across about Costco. It proves that all retailers are not the same.
The company is proving Wall Street wrong by adhering to a radical idea: Treating customers and employees right is good business.

A few excerpts from the article:

"Why shouldn't employees have the right to good wages and the right to good careers?" asks Sinegal one day last month, sitting in his strikingly unpretentious office, more like an alcove really, devoid even of a door separating him from his employees. Costco has told Wall Street again and again that it believes the key to its success rests with taking care of employees and customers.

Given the overpowering influence of Wal-Mart, the nation's largest private employer and the world's largest retailer, at times there has seemed no way out from the downward competitive pressure it exerts. Which is why Costco's defiantly different approach has grabbed the attention of the folks who study these things.

In politics, of course, Wal-Mart's team trumped Costco's. But in business, well, that's another story.


Anonymous said...

Bravo for Costco! They're heads and tails above Wal-Mart! But there is a business that is above them both. I recently read a book titled "Less Is More." The book was loaned out to me, and I can't recall the author.
Anyway this book mentioned 10 top businesses. They had been top business for many years. One business mentioned was "The Warehouse." It is a discount store in Australia and New Zealand. The chain has about 200 stores. I don't remember the founder of the business, but I do remember this.
When he first started the business he DELIBERATELY PUT THEM RIGHT SMACK IN THE MIDDLE OF THE BUSINESS DISTRICT. Why? Because this business owner was thinking long-term. He knew he could have put his stores well outside the local business district. But he knew if he did that EVENTUALLY PEOPLE WOULD COME TO HATE HIS BUSINESS. Why? Because his discount store would have killed many businesses downtown. What he has found instead is that when he opens a new store, approximately 80% OF LOCAL BUSINESSES REPORT AN INCREASE IN SALES. If you were a business owner, would you want
"The Warehouse" in your business district? Of course you would!
Today, Because Wal-Mart hasn't been think long-term, approximately 29% OF PEOPLE HATE THIS BUSINESS. Too bad Sam Walton, David Glass and Lee Scott weren't thinking long-term like the owner of "The Warehouse!"

Anonymous said...

The book is
Less Is More: How Great Companies Use Productivity by Jason Jennings

Anonymous said...

To the above comment, thank you for the author. I had forgotten it.