The Crybabies on Wall Street

Thanks to Jim Sinegal, the bigwigs down on Wall Street have their undies in a bunch.

Jim is the CEO of Costco Wholesale, now the fifth largest retailer in the country.  He loves his job, his employees and his customers.  While creating a retail giant he's also, as they say in New York, 'created such a scandal you never saw."

According to an article in yesterday's New York Times, Costco puts Wal-Mart to shame in the arena of low pricing.  They steadfastly hold to the rule that nothing shall be marked up more than 15% (compared with competitor's markup of 25% and more).  They pay their employees an average of $17 per hour... 42% higher than Sam's Club... and have one of the best health plans in the industry.

Costco's stock has risen more than 10% in the last year.  Employee turnover rate is nearly non-existent.  Sales revenue for June of 2005 is up 9% from the same period last year.

What does Wall Street have to say about this?  If you can get their thumbs out of their mouths long enough to tell you, they wail that Jim is too generous.  He just isn't shaving enough off the top for them to get their greedy little hands on.  An analyst from Deutsche Bank whines, "it's better to be an employee or a customer than a shareholder."  "They could probably get more money for a lot of items they sell," complains another analyst at ThinkEquity.

Wah, wah, wah.  Jim's not playing the game by our rules.  He's too traditional, too old-fashioned.  And on top of that (horror of horrors) he only took a $200,000 bonus last year.  We don't wanna play anymore!

Well, pick up your toys and go home, Boys.  Jim's not bending to anyone's pressure.  His response to all the mishigass?

"On Wall Street, they're in the business of making money between now and next Thursday. 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.

This is not altruistic. This is good business."

My God.  A business that puts its employees and customers before the Almighty Profit does exist.  Isn't it amazing that a simple thing like that would create cult-like customer loyalty and $40 billion in revenue... with almost no advertising?

[Read the NY Times article here.  Free registration required.]

 

Comments

[Mary Hunt]

It's more than prices for women - while on vacation, a gal I met said this... "I flat out refuse to shop there." (meaning WalMart) "They don't treat their employees right and I'm not going to support a company that does that." (the husband was rolling his eyes about now) "I won't shop there at home, either," she added. (He didn't care, but she did and she ruled.)

It's no wonder CostCo has such a high following - it's earned the respect of the female shoppers.

[Michael Martine]

When are people going to realize that having good business sense means that you understand the shareholders are not the only people who matter. In fact, compared to staff and customers, I would argue that shareholders matter the least. Anyone can buy or sell shares, but good staff and good customers are hard to get... and easy to lose. Jim's doing the right thing by showing that low prices does not mean lowest common denominator.

Doing the right thing from a woman shopper's point of view is more than surface satisfaction. As a man, I've noticed (with the help of my wife) how men like to engineer things so that they are comparmentalized and dissassociated from each other, while women perceive things in interrelated and interdependent terms. Jim's strategy of paying his staff well and offering top-notch benefits has a tremendous effect on the health, well-being, and purchasing power of all the women that work for Costco. And that has positive ripple effects throughout a local economy which is fortunate enough to have a Costco. It's a virtuous circle.

Wal-mart pays so poorly, offers such stingy benefits, and treats its women so badly that they sue. The negative economic effects are compounded in a way that locks everyone into a "Wal-mart economy". A vicious circle.