Costco's Extravagant Labor Costs Help Stockholders
1084 Words5 Pages
Business and Its Publics: Inquiry and Discourse
February 20, 2008
Argument Essay (Op/Ed): Final Draft
Costco’s Extravagant Labor Costs Help Stockholders
When you think wholesale warehouse, one word comes to mind—vast. Or maybe, enormous. Or perhaps, titanic. Or some other variation of “very-very-large.” Sam’s Club and BJ Wholesales, with their voluminous ceilings and piles of 64 ounce mayonnaise jars that you can only buy in packs of three, welcome you to ‘Wholesale Land’. The immutable law of this land is to maximize profit; that is, to increase sales or to decrease costs. Multi-billion dollar corporations categorize employee wages and insurance as costs and cut them in an effort to maximize…show more content… “When I started, Sears, Roebuck was the Costco of the country, but they allowed someone else to come in under them,” he said. “We don’t want to be one of the casualties. We don’t want to turn around and say, ‘We got so fancy we’ve raised our prices,’ and all of a sudden a new competitor comes in and beats our prices,” he says. Costco’s dedication to low prices has yielded impressive financial results. During December, Costco Wholesale Corporation reported a 9 percent sales increase as opposed to the projected 5 percent; an extraordinary 14 percent improvement compared to the same period last year.
Most wholesalers either cut costs such as employee wages or insurance, or increase prices to increase profit. Costco’s strategy involves treating employees well, cultivating consumer loyalty, and not allowing another corporation to undercut its prices-- ensuring a profitable future.
Ultimately, Jim Sinegal should be applauded rather than condemned for his management strategies. Costco’s future looks bright because his plans look into the long run. When confronted with annual sales figures, he insists, “This is good business.” I would say it’s excellent business. Costco’s shareholders will be well taken care of by his human capital investment. Watch out ‘Wholesale Land’—with its voluminous ceilings and three packs of 64 ounce jars of mayonnaise – Costco is here.
 Greenhouse, Steven.