Archived The Costco Craze - If you ever wonder why TMs make less

[Mhugh220]

Here is a good documentary on Costco's business model and why they are successful: http://www.cnbc.com/id/46603589#.

I've read several threads about TM pay and comparing themselves to Costco employees. This documentary sheds some light on Costco's business model and things they do differently to save money and generate revenue.

Thoughts-

1. 64 Million members x $50 annual membership fee = $3,200,000,000 before ever selling a product
2. The "Costco Effect," the routine tendency of its members to succumb to the store’s discount-chic allure and spend more than they expect, often buying more than they need
3. Total Sales - Costco ($105 Billion 2013) vs Target ($72 Billion 2013) - $33 Billion difference
4. Costco has 600 stores vs Targets 1,700+ - Less overhead for Costco
5. Costco is a warehouse where customers can shop. Target is a showroom where TMs must maintain "Brand".

I'm not saying TMs (this includes all positions from TM to STL) don't deserve more for what they do. This is just a comparison of how Costco operates. Costco seems to have a good leadership team. Even if Target increased sales I still don't see their executives sharing that with the stores.

All retail stores have the threat of bankruptcy. After watching this documentary you see how Costco tries hard to avoid similar fates (i.e. Sears).

 

[Kartman]

But do they have snacks in the breakroom???

 

[Mhugh220]

Maybe? They do have a cheap food court thing - like food avenue but better, lol. Also you can go around getting samples if you'd like.

 

[POGguy]

Here is a good documentary on Costco's business model and why they are successful: http://www.cnbc.com/id/46603589#.

I've read several threads about TM pay and comparing themselves to Costco employees. This documentary sheds some light on Costco's business model and things they do differently to save money and generate revenue.

Thoughts-

1. 64 Million members x $50 annual membership fee = $3,200,000,000 before ever selling a product
2. The "Costco Effect," the routine tendency of its members to succumb to the store’s discount-chic allure and spend more than they expect, often buying more than they need
3. Total Sales - Costco ($105 Billion 2013) vs Target ($72 Billion 2013) - $33 Billion difference
4. Costco has 600 stores vs Targets 1,700+ - Less overhead for Costco
5. Costco is a warehouse where customers can shop. Target is a showroom where TMs must maintain "Brand".

I'm not saying TMs (this includes all positions from TM to STL) don't deserve more for what they do. This is just a comparison of how Costco operates. Costco seems to have a good leadership team. Even if Target increased sales I still don't see their executives sharing that with the stores.

All retail stores have the threat of bankruptcy. After watching this documentary you see how Costco tries hard to avoid similar fates (i.e. Sears).

That's the problem.

 

[Jill of All Trades]

I would defect and go work at Costco in a second. Who in here wouldn't? (Assuming the Costco was the same distance from your house, etc.)

 

[go ahead]

But Costco doesn't sell as many things as Target. HBA for example, Costco has 5 types of hand soaps big bottles, brand names, good value pricewise. Target has lot's of CHOICES, Method, Meyer's, Caldrea, Softsoap, Dial, etc. overall more variety than just good value. Also, at Target you can pay how you want to, all major credit cards accepted, at Costco, it's cash, check or Costco AMEX card, that's it.

 

[RedDog]

Workers need to be invested with a company to give a damn. Full time workers even with low hourly pay are far more likely to not only do what they are suppose to do but, go that extra mile even when not asked. That used to be Target. Now you have people who have two 4 hour shifts a week and 3 jobs. With tons of part time jobs available why bother putting in any effort for 8 hours or even showing up. I have said it before but, at one time Target and Publix were the same. Took care of employees, ofter more unique offerings, perfectly maintained stores, tons of great service and never a wait at a registers with slightly higher prices. Then they took two seperate paths. Target has left everything it once stood for and crashed and burned and Publix stayed the course and continues to expand, be a success and is one of the only grocery chains that Walmart can not compete with. If you inverst in your workers they become invested in your company. If offer you workers nothing but a few hours a week they could care less about your company. The only plus side of Target stores going hell is my wife does not want to go as often and spends far less when she does.

 

[Mhugh220]

But Costco doesn't sell as many things as Target. HBA for example, Costco has 5 types of hand soaps big bottles, brand names, good value pricewise. Target has lot's of CHOICES, Method, Meyer's, Caldrea, Softsoap, Dial, etc. overall more variety than just good value. Also, at Target you can pay how you want to, all major credit cards accepted, at Costco, it's cash, check or Costco AMEX card, that's it.

This is a part of Costco making more and saving more. They don't have to pay VISA, MasterCard, etc. for their services. And by teaming with AMEX they save that additional fee. There's also the "Costco Effect" - where customers spend more than they expect, often buying more than they need. My wife and I have to take a calculator with us to Costco because we got blindsided one time when we spent $400 on groceries. Probably more than we needed but our grocery shopping for the month was complete.

We tend to get excited shopping at Costco - they rotate their items enough to keep it interesting and they have great deals. I know exactly what Target sells unless it is a special item - which they will only have for 5 mins the first day (i.e. Toms Shoes).

 

[Mhugh220]

Another observation:

Costco is only open for select hours.

M-F 10:00am - 8:30pm
Sat. 9:30am - 6:00pm
Sun. 10:00am - 6:00pm

Target is open from 7am-11pm or 8am-12am or 7am-12am. That's more payroll hours, more TMs, more overhead. This could help Costco employees with a better work life balance as well.

Do you think Target benefits from being open early AM and late PM? I know we rarely had Guests before 9am or after 10pm.

 

[Mhugh220]

@RedDog - I noticed this when I was with Target. TMs with consistent hours (32+) were more engaged in the company. They worked harder and were eager to contribute to making the store better. Target needs to reinvest in their employees. Bring back benefits to the original levels, actually have full time TMs, staff the stores better (more payroll hours), and increase the pays so TMs can actually make a living.

When I was there I had a TM who desperately needed the 24+ hours to keep insurance. The STL cut my work center hours down to where no one had more than 18hrs a week. Let's just say I always overspent hours and had to constantly explain how we (Replen and I) were going to make up for it.

 

[whippingboy]

Do you think Target benefits from being open early AM and late PM? I know we rarely had Guests before 9am or after 10pm.

Only for alcohol sales.

 

[Mhugh220]

Unfortunately we can't sell alcohol in MD or PA. I often wonder if it's worth it for Walmart to remain open 24 hrs. Unless they figure they're there stocking shelves, what's the harm in being open to customers?

 

[SFSFun]

But Costco doesn't sell as many things as Target. HBA for example, Costco has 5 types of hand soaps big bottles, brand names, good value pricewise. Target has lot's of CHOICES, Method, Meyer's, Caldrea, Softsoap, Dial, etc. overall more variety than just good value. Also, at Target you can pay how you want to, all major credit cards accepted, at Costco, it's cash, check or Costco AMEX card, that's it.

Or debit card.

 

[commiecorvus]

Once again, all valid points but I would riposte with this simple observation, Spot has to change it's business model and its management methods.

Am I suggesting that they close stores?
Not at all but doing a better job of running them absolutely.
Giving people the hours they need to survive and get health insurance certainly.

You pointed out that if there were higher profits there was little chance that management would see fit to pass that down to the peons but that must be done if they want to see continued profits.
In order to create the kind of friendly environment that they harp on, that will make guests feel like a guest, they need TMs who feel cared about.

Maybe cut back the hours if that will help costs.
Create long term plans that focuses on doing what Costco is doing in terms of slow 'targeted' growth.

Make sure your managers have deep investment in the company and intend to stick around.
Also make sure they know WTF they are doing.

None of these things are rocket science.
They just require that the company tell the board of directors and stockholders they are going to have to hold on for a bit because the company is going to do the right thing for a while and will be the better for it in the long run.

 

[Mhugh220]

None of these things are rocket science.
They just require that the company tell the board of directors and stockholders they are going to have to hold on for a bit because the company is going to do the right thing for a while and will be the better for it in the long run.

This would require the board to have faith in their CEO. JCP tried to reinvent themselves and ended up firing their CEO before his changes made an impact, and by impact I mean more money.

Ditching Canada is a start. But has Target already gone too far down the rabbit hole to come back?

I remember Target in the late 90s early 2000s. What changed since then? Pfresh, RedCards, logistics process, slimming down org charts, training programs, hiring within, career ETLs, etc.

When was the last time Target was active in innovation rather than reactive? They need to set the standard not try to keep up with it.

How many aisles in the store need to be water pallets or large boxes of grahm crackers? Why is there an entire aisle of water in Toys? Why is Jan-March bulk paper and 2 bottles of shampoo for the price of one? People who buy bulk go to a Costco not Target.

Target could benefit from a new business model but it's not in their DNA. And without it they're destined to be like Sears, Kmart, or worse (Woolworth).

 

[PullMeBackIn]

Target absolutely needs to get better buy-in from their employees. As it is now the only people that are really invested are the ETLs. Part of it is pay, part of it is long-term prospects at Target. Target essentially hires mercenaries that are only there for a short period of time, rather than employees who intend to spend a career working for the company (except again, ETLs who are given many opportunities and avenues for advancement). I'd be very interested to know what the average tenure of a Target team member's employment. I wouldn't be at all surprised if it is under a year.

What's the result of this? A pool of employees who mostly only do enough to not get fired, they don't go the extra mile because they know the best reward waiting for them is a few extra cents raise and maybe a shot at a team lead position one day. This is one of the things that actually puts Target below even Walmart when it comes to their workforce. There's opportunities for Walmart employees to move up beyond a supervisor level. That company is filled with people who started out as a salesfloor worker in a store. Target used to be that way but it's quickly disappearing due to their initiative starting about 10 years ago where they were bringing in their ETLs primarily as new hires.

Target has a lot more to change than simply trying to "look better" and closing Canada.

 

[Mhugh220]

They need ETLs that are invested - which I think would come from internal advancement.

I bet in some areas the TM tenure is longer than the ETL. We had tons of 10+ year TMs and only 1 ETL over 3 years.

 

[tgtguy]

Target absolutely needs to get better buy-in from their employees. As it is now the only people that are really invested are the ETLs. Part of it is pay, part of it is long-term prospects at Target. Target essentially hires mercenaries that are only there for a short period of time, rather than employees who intend to spend a career working for the company (except again, ETLs who are given many opportunities and avenues for advancement). I'd be very interested to know what the average tenure of a Target team member's employment. I wouldn't be at all surprised if it is under a year.

What's the result of this? A pool of employees who mostly only do enough to not get fired, they don't go the extra mile because they know the best reward waiting for them is a few extra cents raise and maybe a shot at a team lead position one day. This is one of the things that actually puts Target below even Walmart when it comes to their workforce. There's opportunities for Walmart employees to move up beyond a supervisor level. That company is filled with people who started out as a salesfloor worker in a store. Target used to be that way but it's quickly disappearing due to their initiative starting about 10 years ago where they were bringing in their ETLs primarily as new hires.

Target has a lot more to change than simply trying to "look better" and closing Canada.

Years ago when I first started with Spot, my etl/log point blank told me she would do whatever it took for me to have hours....she told me that she looked out for those that worked hard. This doesn't happen anymore...now it seems those who get the most hours...kiss the most ass ( I don't care for the taste it leaves in my mouth, so I tend not to do it ). I think what Spot should do is roll out a new program called Back to the Basics...and remember what set us ( Spot) apart from the others back in the good ole days. We offered great guest service, clean , clutter free aisles and if you needed help there were team members all over the place ready and willing to help. Etls/ stls didn't sit in their office all day...or stand around gossiping they actually worked with their team. Team members who came to work knowing they didn't have to fight for hours or benifits Now, there are pallets and tubs on the floor all day long, guest service? sure just make sure you shop the first three weeks of the month cause the last week...gotta make that payroll ( no matter what process suffers.)

 

[Mhugh220]

@tgtguy - Back to the basics would be awesome.

 

[sher]

I love Costco! 59¢ fountain sodas, $1.50 giant pizza slices, free samples! It's right across the parking lot from Target so I'd definitely jump ship if there were an opening. That thing about the limit on payments you can use isn't true, though. I use a MasterCard debit and my mom uses visa debit. I hear they do have some restrictions at the gas station for the non members though.

 

[mrknownothing]

I love Costco! 59¢ fountain sodas, $1.50 giant pizza slices, free samples! It's right across the parking lot from Target so I'd definitely jump ship if there were an opening. That thing about the limit on payments you can use isn't true, though. I use a MasterCard debit and my mom uses visa debit. I hear they do have some restrictions at the gas station for the non members though.

The limit may only apply to credit transactions via MasterCard or Visa, not debit transactions where you enter your PIN.

 

[sher]

I inferred from that one post that mentioned payment methods (err the first one that mentioned it.. I typed my response before reading the thread to the end) that they were saying no mc or visa was allowed at all. But mc and visa debit for sure are allowed.

 

[happyfeet]

Been with them long enough to know it was a great place to.work sure it had its issues but dropping the standards, increasing hours , stopped caring about your staff and guests to be honest no staff equals un happy guest.4,5 7,8 hours a week does not encourage people to care if they come in or not or if they work while there not hard to just walk around and be seen with so few hours and to be honest too many etls per store who tell you what needs done yet you never see helping with the work they have this magic hiding place it seems .

 

[Megaparsec]

But do they have snacks in the breakroom???

Better. They have a Foosball table.

 

[thatcashierdude]

I love Costco! 59¢ fountain sodas, $1.50 giant pizza slices, free samples! It's right across the parking lot from Target so I'd definitely jump ship if there were an opening. That thing about the limit on payments you can use isn't true, though. I use a MasterCard debit and my mom uses visa debit. I hear they do have some restrictions at the gas station for the non members though.

It's members only at both the gas station and the store if I'm correct. Accepted payment is cash/amex/PIN debit at the registers, and amex/PIN debit at the gas pumps.