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It’s official, paying decent wages and treating your employees properly makes better business sense and leads to higher profits. While their second biggest competitor, Walmart, only saw a 1.2% rise in year on sales, Costco’s most recent quarterly earnings report showed an 8% rate of growth in year on sales, a 5% rise in same-store sales, and an almost $70 million rise in membership fees.

With their foes operating in the same economy, what explains Costco’s profound success over their supposedly powerful competitors, especially Wal-mart? http://www.addictinginfo.org/2013/06/18/costco-pays-well-and-soars-whi
le-wal-mart-and-others-pay-peanuts-and-sink/#ixzz2Ws1TQ0ks]

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Wal-mart Stores has been cutting staff since the recession – and pallets of merchandise are piling up in its stockrooms as shelves go unfilled. In the past five years, the world’s largest retailer has added 455 US Wal-mart stores, a 13% increase, according to company filings in late January. In the same period, it’s total US workforce, which includes employees at its Sam’s Club warehouse stores, cut jobs by about 20,000, or 1.4%,

A thinly spread workforce has other consequences: longer checkout lineless help about the store, and disorganization. Last month, Wal-mart placed last among department and pick discount stores in the American customer satisfaction index, the sixth year in a row that the company has either tied or taken the last spot. This dwindling level of customer service comes as Wal-mart hast touted it’s in-store experience to lure financially strained shoppers and to counter the threat from online rivals such as Amazon.com.”

At a Feb. 1 gathering of Walmart managers, U.S. Chief Executive Officer Bill Simon said Walmart was “getting worse” at stocking shelves, according to minutes of the meeting obtained by Bloomberg News. Simon said “self-inflicted wounds” were Walmart’s “biggest risk” and that an executive vice president had been appointed to fix the restocking problem, according to the minutes.

The stocking challenge coincides with slowing sales growth. Same-store sales in the U.S. for the 13 weeks ending April 26 will be little changed, Simon said during a Feb. 21 earnings call for investors. “When times were good and people were still shopping, the lack of excellence was OK,” says Zeynep Ton, a retail researcher and associate professor of operations management at the MIT Sloan School of Management. “Their view has been that they have the lowest prices so customers keep coming anyway.” Ton says Walmart shoppers are “mad about the way they were treated or how much time they wasted looking for items that aren’t there.”

Retailers consider labor—usually their largest controllable expense—as an easy target for cost-cutting. That’s what happened at Home Depot (HD) in the early 2000s, when it tried to trim expenses and boost profits by cutting staff and relying more on part-time workers. Eventually customer service and satisfaction deteriorated, and sales growth at established stores fell. “When you tell retailers they have to invest in people, the typical response is, ‘It’s just too expensive,’” Ton says.

“There’s no manpower in the store to get the merchandise moving,” says Tifft, who oversees grocery deliveries and is a member of OUR Walmart, a union-backed group seeking to improve working conditions at the chain. “Customers come in, they can’t find what they’re looking for, and they’re leaving.”

Walmart is entangled in what Ton calls the “vicious cycle” of understaffing. Too few workers leads to operational problems. Those problems lead to poor store sales, which lead to lower labor budgets. The decision to hire more workers “requires a wake-up call at a higher level,” Ton says.

Rochelle Jackson, who works at the jewelry counter at a Walmart store in Springfield, Mo., says a supervisor recently told her the number of hours available to schedule employees is linked to sales performance: The worse the sales number, the fewer hours available. “I asked, ‘Why can’t we have enough hours to make the store work?’?” recalls Jackson, who has worked at two Walmart stores since 2009. “They said, ‘It’s orders from home office.’?”

Tim White, an attorney, recalled trying to buy wall paint at the Walmart near his home in Santee, Calif.: “You wait 20, 25 minutes for someone to help you, then the person was not trained on mixing paint. It was like, you have to help them help you.”

The White family’s visits to Walmart—which had been a several times a week occurrence several years ago—became less and less frequent until they stopped in the past year. The eight-member clan now shops at Target and Costco. http://www.businessweek.com/articles/2013-03-28/walmart-faces-the-cost
-of-cost-cutting-empty-shelves#p2

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