Costco’s Secret Weapon: Better Salaries & Benefits

December 6th, 2011 · 12 Comments

Do you think the difference in salaries between Costco and Sam’s Club really makes a difference?  It seems that it does.  According to an article on AllBusiness.com, it makes a surprising amount of difference and can be quite a good lesson for other businesses.

The average wage at Sam’s Club is $11.00 per hour, whereas Costco’s average is $17.00 per hour.  Of course there are big differences in other benefits, including health care coverage, as well as intangible items like training, management and company culture in general that need to be taken into account as well.  However, it does seem that most everyone agrees that Costco is much ahead of Sam’s Club in all of those respects too.  So, it probably comes as no big surprise that Sam’s Club has a higher employee turnover of between 20% and 50% each year, but Costco loses just 6% to 20% of its employees per year (this is employees that actually quit).  What that means, according to the article, is that Sam’s Club spends far more – 350% more – in recruiting, hiring and training costs when compared to Costco.

Wow, that is a huge difference!  So, even though Sam’s Club is saving on salaries, they probably aren’t really saving anything in employment costs in the long run because of the constant need to hire and train new people.  And as we all know, anytime you lose employees it is very costly to replace them, sure, but you always lose any knowledge that they had gained in their time working at the company.  But maybe at Sam’s Club that isn’t such a big deal because they hire the employees that have little skills and are not highly motivated.

Another way that the article’s author compares how this difference in salary seems to affect the two stores is through sales.  Costco, with the  higher-paid employees that stay in their jobs longer (and are most likely better trained, happier, and more knowledgeable about the store), sales average $814 per square foot.  However, at Sam’s Club, with their high turn-over (and likely less motivated, happy, and knowledgable employees) has a sales average of just $586 per square foot.  That is a shocking 50% increase (almost) per square foot in average sales at Costco.

Obviously, things like benefits and the overall company culture make a big impact too, so the differences aren’t all down to higher salaries at Costco.  Of course, obviously it helps.  If you have more money to pay for an employee, you are much more likely to attract a better class of employee; one that has more to offer the company.  Starbucks is another good example of how big an impact benefits and non-monetary policies can make can on employee loyalty.  Employees love working there, even though they don’t have exceedingly high salaries, because of the other benefits such as health insurance and flexible work schedules.

Looks like if Sam’s Club really wants to compete with Costco, they should consider a little bit of an increase in salaries, but also they really need to work on their other benefits.  Company culture can go a long way in making employees happier, and doesn’t need to take tons of money to improve.  But then, maybe they don’t really care about that because they’re too used to the Walmart way of doing business.

For the full article, including links to the research used for the numbers:

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12 Responses so far ↓

  1. 1 Jane doe // 2014.06.27 at 10:07 pm

    I’m a front end supervisor at SAMs n I must agree, I’ve been with company 2 n a half years, and I am very very good at my job might I add. However I can say we aren’t paid well at all. I for example only make $11.15 an hr, when originally given my promotion I was only given a $0.30 raise to do 90% more work. We’re only classified as part time employees and are usually only able to work 25 hours a week, to cut down labor costs. Usually there is only 1 front end supervisor scheduled at a time too, so I’m forced to cover tires, pharmacy, cig cage, liquor store, cashiers, mobility, returns desk, membership desk, jewelry dept, and cafe all by my self. Often were only able to take a lunch break or don’t get to take a break untill 15 mins befor our shift ends. I literally have NEVER had any vacas approved lol untill I took time off to have dental surgery and instead of using my sick pay they used my vaca pay. I used to love this company, but would love to get hired as a supervisor for Costco!!!

  2. 2 Jack rego // 2014.04.13 at 6:21 pm

    Costco is a good company. But need to change the way managers are paid. Mangers only get paid for 40 hours
    There are exempt salary employee. But need to work 60 to 66 hours per week .performing physical labor.
    so that the company will hire less hourly employees and have its managers work for free
    which is illegal. So that upper management and senior regional staff will get there big bonus.

  3. 3 A // 2013.05.30 at 11:31 am

    I am an Employee and i love my job. They take great care of thier employees. Costco’s new 2013 employee agreement handbook, the company starts employees off at 12.00 a hr able to top out over 20.00. I am loyal and very happy employee. Paid holidays. This one of the greatest companies in retail history. Thank you Jim Sinegal and godbless you. I am your loyal employee for life thanks for taking care of me.

  4. 4 Frank // 2012.07.24 at 4:30 pm

    hummmm I was a price/costco manager and was paid 31,500 to start……the starting salary now for someone working on the floor is at 60k a year……way more then a mere 8k at 4k every six months for a topped out clerk…..most where not here long enough to appreciate Jim’s generosity……get a clue

    • 5 Sheila // 2012.11.29 at 12:24 am

      Frank,
      Can you explain your post a little better. I’m interested to know if you are saying that Costco does not treat its costs/floor managers as well as the article implies. What do you mean by 8k-4k each 6 months and your get a clue comment? I’ve never shopped at Costco but am interested in the comparisons between SAMs and Costco.

  5. 6 jane // 2011.12.13 at 11:27 am

    i think costco is a decent place to work, but the little guy managers ( JR, STAFF) work 10 + hours days (if lucky to get a bite to eat) , some 6 day weeks, some 10 + days in a row, middle of the night alarm calls, building checks twice on holidays, up side down hours, schedules changed so often wk to wk that a managers has a hard time to schedule an appointment or family time. it seems to me with all the hours they work to make a the gm shine for a walk and to make sure the big guys get a bonus, i would think the little managers should atleast get an incentive too. the hourly employees get a bonus. why not the little managers who make the bonus happen . a cell phone is always needed for the random hours of txt and calls. costco may give a discount on a plan for everyone, but still the txt and calls from vendors, lawn care, snow plow, etc and other managers can really burn usage…maybe if all said, costco pay may equal out to sams, for i know costco managers take great pride in making costco standards high. sams standards are lower, but the managers prob don’t work and stress as costco managers do. maybe the managers should start to log hours spent at work and the hours of alarm calls, etc and just see what a manger really gets paid an hour at costco. i am betting it won’t be much different than sams…hope all the upper guys can appreciate what these managers do for them and costco. a small bonus would be appreciated, since the pay raise keep getting smaller and smaller . CEO may make only 600, + a year, but the stock and bonus seems to make up for it. how about spreading the bonus out more even and keep the spirits up of these over worked salary managers at costco who looked runned down ……………………………………….maybe costco is just growing too fast!! INTERESTING WAY TO SHOW A SALARY http://www.thenewstribune.com/2011/11/29/1924951/filing-shows-pay-for-new-costco.html

    • 7 Kevin // 2013.08.04 at 1:04 pm

      WRONG! I have worked for Costco for over 15 years. I have also worked in numerous cities. I am a Jr. manager, or a staff level manager and the only time that I have worked 6 days in a week is during the holiday period and thats maybe a few weeks out of the year. Do we work 9-10 hour days, yes. We are scheduled 9. I always find time to take a 30-45 minute lunch, sometimes an hour but I dont mind working hard. 6 day work weeks are VERY rare. I also get 6 weeks of vacation and every paid holiday off. Couple that with my generous salary ($60,000+) and incredible benefits for my family and myself, and I consider myself lucky to be part of this company. I hold two degrees. One a Bachelors in Liberal Studies, and two a Masters in Education. I dont see myself leaving Costco to join the unstable education system here in California. Im in my early 30′s and own my own home and support 2 small kids. Not easy to do in California without a good, stable job. Work hard, have some drive, and you will be rewarded at Costco.

      • 8 Lou // 2013.10.27 at 11:56 pm

        What state do you work in??? 6 weeks vacation? I’ve been there 11years and barely get 3!

        • 9 Lou // 2013.10.27 at 11:58 pm

          and yes 60k is great and all but when you work 9 hours (more than that, usually) it averages out to what some stockers/forklift drivers/etc are making…hmmmm. I am a Manager too…

        • 10 R // 2013.10.28 at 7:00 am

          I am not a manager, I am hourly and 6 years in. I get 3 weeks vacation. At 10 years I will get 4 weeks and I believe at 15 I will get 5 weeks. Also I take advantage of the winter leave every year.

  6. 11 R // 2011.12.12 at 11:50 pm

    As an employee I agree with this post. Love working for Costco, I see my self retiring from here. The benefits are great and they take care of us. I am a happy employee and a happy member.

  7. 12 Paul // 2011.12.06 at 7:31 pm

    One problem with Sams and their wages is that if they decide to compete with Costco wage-wise, the folks working at Wal*Mart will be wanting the same too.

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