Interesting to not mention Costco’s union strategy. Every time a Costco is successfully organized and win a union election, they give raises across the board in order for employees at different locations to not unionize. Workers organizing has been a strong push in how Costco treats their employees.
Life and power will always be a game of consequences, meaning unions are necessary to hold bougeoisie accountable or else they'll not grant worker's incentives
Some are - My teacher association, but many don’t do group bargaining and as such aren’t. They are a barrier to nominal entry (I want my Lawyer to be a member of the bar, as that means something), but not a full fledged union.
That's a description of a guild. The ancestral origins of the union. Guilds were for independent business owners working together to limit competition, and they had the secondary objective of quality assurance to protect the industry. But the era of independent professional businesses is just about over. So lawyers and doctors, will unionize eventually, because they will lose all of their political influence and social standing if they don't.
Interesting discussion of "economics," comparing Costco, Target and Walmart. This is stuff I knew decades ago, I figured it out without "comparing data" and realized they actually had different business models, even though they "look the same" from the outside.
But I've always had these little "fits" of mental exercise! 🤓
I didn't know other ppl did that too, my friends certainly don't. 😵💫
So, anyway, it's nice to see someone write the whole thing up and use data to support their argument, and simply compare the different businesses.
And make a few conclusions. Yep, it's interesting stuff. Food for thought, and all that. 🤪
I also gain important insight from the comments!
There's always a "Debbie Downer" 🚽 who will inject "exploitation" (or *whatever*) into the mix... 😱
However, it was VERY refreshing to see a comment from someone who knows they make a "decent" living, does their job (and only that), and appreciates their employer for the fact that someone else put the money up to form and grow the business! And, that allows the company to hire people to do prescribed, defined jobs, and pay them for it.
Such a person (the OP) has the correct mindset for a cooperative society, and their priorities in the right place. 😁
It's refreshing.
Cuz I see so many (the "loud minority") always complaining about the 'decline of our society,' and such garbage.
They're not doing anyone a favor by always blowing from the rooftops.
No, it just creates an unnamed, ambiguous anxiety that contributes to everyone's "bad feelings."
Instead, let's all work together to feel good, and build our mutually beneficial 'cooperative society!' 😁
Because that requires "union" (e.g. cooperation) and a certain group of folks currently embroiled in implementing an illegal agenda (#project2025) to suit themselves isn't about any of that.
Exploit? My employer pays me a top 6% income and I do nothing but my job and that is it. I didn't put the hundreds of millions of dollars up to start and grow the business.
Leftists have this bizarre obsession with exploitation, and I'm not sure why.
Investment into a business is valuable, no one is saying that it isn't. Next time, if you want an honest conversation, refrain from making strawmans and labels. I'll be here if you ever want a discussion.
So you are kinda right. If everyone had an income as good as yours, then the exploitation, a word you clearly don't know the definition of, would be minimal. But you are too hung up on your own limited view of the world to recognize that not everyone is doing alright, and there is plenty of exploitation taking place. And some of it is malevolent. Come back and say the same thing when your employer gives you a shitty three months of severance and you start thinking about driving a Uber. Because people who do nothing but their jobs are the low hanging fruit when it's time to cut workforce.
I wonder if Andrew thinks slaves were exploited? Because less then 200 years ago a large part of the US economy was based on that dynamic. Even for those workers who weren't actual slaves, in the pre-union era they were still basically treated and compensated as such (immigrant labor has always been ripe for exploitation, both then and now). During the struggle for labor unionization big business would literally hire people to violently attack workers who struck for higher wages. And then look at the extreme hostility to unionization from big business of today (e.g. Amazon). You think the attitudes of the people who have access to capital have changed all that much from then to now?
But Andrew's all smug in his situation, so why should he bother himself with history. He's got his. Obviously it's all due to his smarts and hard work (and not to good fortune or social structures set up to ease his success). It's just too bad for everyone else who doesn't have his inherently superior qualities.
depends who you're shoplifting from. Target makes 100B revenue AFTER all operational costs including their low wages. So yeah, shoplifting isnt' a big deal. Corporate wage theft is a crime of much greater magnitude and scale. Yet cops won't go after CEOs, ever.
It’s because they don’t advertise. Advertising is like 1/3 of most companies’ budget. Costco puts that into employee pay and benefits then lets the employees be ambassadors for a job they actually like.
Looking at Walmart's annual report, they spend $5.4B on "advertising cost" out of $683.3B cost of sales+operating costs, so less than 1% of Walmart's total spending is on advertising.
Looking across the market, Gartner’s 2025 CMO Spend Survey says that total marketing budgets are on average 7.7% of company revenue, and within that, paid media ("advertising") is 2.4% of company revenue. Your estimate that "advertising is like 1/3 of most companies' budget" seems wildly off given that the actual number is less than 3% for most companies.
It's also not true that "Costco doesn't advertise." I grew up with vivid memories of opening up the Sunday paper and finding color-printed Costco ads that would inform my parents of that week's deals. Here's a website that aggregates Costco ads, one of many that you'll find if you do a google image search for "Costco ad": https://www.theblackfriday.com/weekly-ads/costco-weeklyads.php
Yeah, I believe County Fence must've been thinking about other fields/ businesses where proportionately enormous ad & marketing efforts *are* required. (Ad spend is a subset of marketing, so some other #s in this thread may not quite capture reality.) Without trying to narrow down what these businesses might be, I'd hazard a guess none of 'em involve retailing goods to the public.
And the article fails to mention another key difference: Costco uses contractors. A lot of them. Those people handing out free samples? Contractors. All of them. Store maintenance? Contractors. Include those wages, and the gap narrows significantly.
"Shrinkage" is the Costanza of the retail world, forever causing inexplicable problems. We focus on Costco's near-elimination of shoplifting, but the streamlined-SKU, big-package setup must cause the other sources of shrinkage to, uh, get smaller too.
Consider: employee pilferage. Dumb-ass accidents. Small stupid errors. Big stupid mistakes. Things going rotten. Things getting broken.
You'd expect all these inventory costs to *soar* in a 20000-SKU environment. In fact I'd bet every single category at eg. Target shinks pre-sale *faster* than even identical SKUs at CostCo. Shoplifting aside, high supply-chain complexity *is* shrinkage. Probably.
This is a blast, you guys, I'm amazed how interesting this stuff is. Service journalism (& wised-up commentary) at its finest, finding out the bones of things. Thank you.
I’ve read that up to half of all “shoplifting” is done by employees. Could the fact that Costco’s employees are better treated and paid contribute to their lower loss levels?
And more undetectably, I should think. Any insider who knows the system well enough to abscond with valuable goods & then come back to work will also have calculated their risk to be almost zero.
Smart inside-jobbers, I'd think, wd also not be greedy. They'd make each individual theft too small to be worth investigating & wd certainly leverage the inevitable time lags of stock management. When no one even realizes there's been a robbery til weeks or months later, well - if an inventory falls in the warehouse, does anybody hear it??
Seems to me, though, that there must be social-engineering ways to block this. Maybe juggle schedules, such that individuals aren't always working with the same people; this would lessen the chance of like minds coming together to scheme. And it would increase paranoia, in a salutary way, changing the risk calculation for any would-be thief.
So would simple, frequent, irregular, unpredictable changes to process, protocol and procedure -- minor tweaks with no *apparent* effect on productivity, whose real purpose is just to negate the informational advantage that lets staff thievery succeed.
meanwhile, major corporations steal wages from workers (not to mention underpayment, and various other labor violations). So, tit for tat, except the crime by the corporations is on a much larger magnitude.
I wrote a paper in B school comparing Walmart to Costco. One conclusion my research led me to was that the shrinkage difference was in large part due to how the company treated its workforce. Treat them well, as Costco does, and they will be more vigilant towards shoplifters. Treat them like shit, as Walmart does (or did when I wrote the paper), and they’ll watch someone wheel a 50-inch TV out the door without paying.
Last point to recall: Costco isn’t trying to be a full service grocery store. They know you still need to go elsewhere for a few things, but Target and Walmart and trying to be your primary grocery store and thus stock food very differently.
It’s often said that having many choices does not necessarily improve life quality. You make a great point that offering variety does not necessarily improve company profits.
Costco is similar to Sam's Club but they don't seem similar in compensation (in the 60 seconds of googling I just did when I thought of this). Of course the upper management mindset is WAY different, being that it's Walmart's mindset.
Yes, comparison to Sam's is what is missing from this analysis. Having been members at both at various times, I honestly don't understand why it is necessary for Sam's to suck so much worse than CostCo, or how Sam's even holds onto members in the markets where the two compete. Seems like mismanagement, pure and simple.
I've heard people make a Target vs. Wal-Mart comparison between CostCo and Sam's, but it's honestly more like Buc-ee's vs. a gas station where you have to ask for a key ("la llave") to use the toilet around the back that hasn't been cleaned since someone died of dysentery on it.
I can't think of another duopoly with a larger gap in quality between the two players.
Next doors to me have changed 4 times in the time I've lived in my house. Couple that were then when I moved in, the woman's mother worked in Costco and I still see her working there 35 years later - moved from till operator to till supervisor who also operates tills if needed. That's quite remarkable. Even the door security people I know by name - been working there years. Training loss must be minimal.
Well the flip side of fewer SKUs is that each one probably represents a bigger risk - Costco are probably significantly more conservative in what they stock.
Costco had thousands more items online too. They have less shrink because members know if you steal from them the membership costs will likely go up and you can get a membership level where you get a percentage back on what you’ve spent. Costco has better produce than most stores aside from Whole Foods. Costco is also great to kill a couple hours just walking around checking shit out.
Interesting to not mention Costco’s union strategy. Every time a Costco is successfully organized and win a union election, they give raises across the board in order for employees at different locations to not unionize. Workers organizing has been a strong push in how Costco treats their employees.
Life and power will always be a game of consequences, meaning unions are necessary to hold bougeoisie accountable or else they'll not grant worker's incentives
Weird, plenty of professions exist without unions that have high-paying jobs.
Professional Associations are unions.
Some are - My teacher association, but many don’t do group bargaining and as such aren’t. They are a barrier to nominal entry (I want my Lawyer to be a member of the bar, as that means something), but not a full fledged union.
That's a description of a guild. The ancestral origins of the union. Guilds were for independent business owners working together to limit competition, and they had the secondary objective of quality assurance to protect the industry. But the era of independent professional businesses is just about over. So lawyers and doctors, will unionize eventually, because they will lose all of their political influence and social standing if they don't.
Interesting discussion of "economics," comparing Costco, Target and Walmart. This is stuff I knew decades ago, I figured it out without "comparing data" and realized they actually had different business models, even though they "look the same" from the outside.
But I've always had these little "fits" of mental exercise! 🤓
I didn't know other ppl did that too, my friends certainly don't. 😵💫
So, anyway, it's nice to see someone write the whole thing up and use data to support their argument, and simply compare the different businesses.
And make a few conclusions. Yep, it's interesting stuff. Food for thought, and all that. 🤪
I also gain important insight from the comments!
There's always a "Debbie Downer" 🚽 who will inject "exploitation" (or *whatever*) into the mix... 😱
However, it was VERY refreshing to see a comment from someone who knows they make a "decent" living, does their job (and only that), and appreciates their employer for the fact that someone else put the money up to form and grow the business! And, that allows the company to hire people to do prescribed, defined jobs, and pay them for it.
Such a person (the OP) has the correct mindset for a cooperative society, and their priorities in the right place. 😁
It's refreshing.
Cuz I see so many (the "loud minority") always complaining about the 'decline of our society,' and such garbage.
They're not doing anyone a favor by always blowing from the rooftops.
No, it just creates an unnamed, ambiguous anxiety that contributes to everyone's "bad feelings."
Instead, let's all work together to feel good, and build our mutually beneficial 'cooperative society!' 😁
Why not?!
Hmmmm? 🤔
Because that requires "union" (e.g. cooperation) and a certain group of folks currently embroiled in implementing an illegal agenda (#project2025) to suit themselves isn't about any of that.
If those skills are so valuable imagine their pay without exploiting them for max profitability
Exploit? My employer pays me a top 6% income and I do nothing but my job and that is it. I didn't put the hundreds of millions of dollars up to start and grow the business.
Leftists have this bizarre obsession with exploitation, and I'm not sure why.
Investment into a business is valuable, no one is saying that it isn't. Next time, if you want an honest conversation, refrain from making strawmans and labels. I'll be here if you ever want a discussion.
Im still waiting to hear you justify the extreme claim of ‘exploitation’
So you are kinda right. If everyone had an income as good as yours, then the exploitation, a word you clearly don't know the definition of, would be minimal. But you are too hung up on your own limited view of the world to recognize that not everyone is doing alright, and there is plenty of exploitation taking place. And some of it is malevolent. Come back and say the same thing when your employer gives you a shitty three months of severance and you start thinking about driving a Uber. Because people who do nothing but their jobs are the low hanging fruit when it's time to cut workforce.
"Leftists"... Well, you'll change your tune after you're replaced by a very small shell script.
Dude I have equity, once we IPO I’m going back to the consulting space and making even more money. AI is not taking my job.
I wonder if Andrew thinks slaves were exploited? Because less then 200 years ago a large part of the US economy was based on that dynamic. Even for those workers who weren't actual slaves, in the pre-union era they were still basically treated and compensated as such (immigrant labor has always been ripe for exploitation, both then and now). During the struggle for labor unionization big business would literally hire people to violently attack workers who struck for higher wages. And then look at the extreme hostility to unionization from big business of today (e.g. Amazon). You think the attitudes of the people who have access to capital have changed all that much from then to now?
But Andrew's all smug in his situation, so why should he bother himself with history. He's got his. Obviously it's all due to his smarts and hard work (and not to good fortune or social structures set up to ease his success). It's just too bad for everyone else who doesn't have his inherently superior qualities.
1) slavery is evil and it was a major hindrance to economic growth in the US.
2) Unions are criminal cartels.
And do those high paying professions have weekends?
Yeah mean Im literally at a concert right now having a bunch of beers and will be off most of the next week.
you're at a concert and reading substack comments? I gotta know: what concert is this?
There as been a lot of dunking on Hasen's pro-shoplifting take, but this article is the best of all of them.
depends who you're shoplifting from. Target makes 100B revenue AFTER all operational costs including their low wages. So yeah, shoplifting isnt' a big deal. Corporate wage theft is a crime of much greater magnitude and scale. Yet cops won't go after CEOs, ever.
It’s because they don’t advertise. Advertising is like 1/3 of most companies’ budget. Costco puts that into employee pay and benefits then lets the employees be ambassadors for a job they actually like.
Looking at Walmart's annual report, they spend $5.4B on "advertising cost" out of $683.3B cost of sales+operating costs, so less than 1% of Walmart's total spending is on advertising.
Looking across the market, Gartner’s 2025 CMO Spend Survey says that total marketing budgets are on average 7.7% of company revenue, and within that, paid media ("advertising") is 2.4% of company revenue. Your estimate that "advertising is like 1/3 of most companies' budget" seems wildly off given that the actual number is less than 3% for most companies.
It's also not true that "Costco doesn't advertise." I grew up with vivid memories of opening up the Sunday paper and finding color-printed Costco ads that would inform my parents of that week's deals. Here's a website that aggregates Costco ads, one of many that you'll find if you do a google image search for "Costco ad": https://www.theblackfriday.com/weekly-ads/costco-weeklyads.php
Not advertising might also be downstream of fewer SKUs. They don't need to tell us about that new niche product they just added.
Why would you ever think that advertising is a third of costs?
It is often attributed as such in the film and pharmaceutical industry, so maybe that is why they thought this was the case.
Yeah, I believe County Fence must've been thinking about other fields/ businesses where proportionately enormous ad & marketing efforts *are* required. (Ad spend is a subset of marketing, so some other #s in this thread may not quite capture reality.) Without trying to narrow down what these businesses might be, I'd hazard a guess none of 'em involve retailing goods to the public.
And the article fails to mention another key difference: Costco uses contractors. A lot of them. Those people handing out free samples? Contractors. All of them. Store maintenance? Contractors. Include those wages, and the gap narrows significantly.
"Shrinkage" is the Costanza of the retail world, forever causing inexplicable problems. We focus on Costco's near-elimination of shoplifting, but the streamlined-SKU, big-package setup must cause the other sources of shrinkage to, uh, get smaller too.
Consider: employee pilferage. Dumb-ass accidents. Small stupid errors. Big stupid mistakes. Things going rotten. Things getting broken.
You'd expect all these inventory costs to *soar* in a 20000-SKU environment. In fact I'd bet every single category at eg. Target shinks pre-sale *faster* than even identical SKUs at CostCo. Shoplifting aside, high supply-chain complexity *is* shrinkage. Probably.
This is a blast, you guys, I'm amazed how interesting this stuff is. Service journalism (& wised-up commentary) at its finest, finding out the bones of things. Thank you.
I’ve read that up to half of all “shoplifting” is done by employees. Could the fact that Costco’s employees are better treated and paid contribute to their lower loss levels?
See my post below!
And more undetectably, I should think. Any insider who knows the system well enough to abscond with valuable goods & then come back to work will also have calculated their risk to be almost zero.
Smart inside-jobbers, I'd think, wd also not be greedy. They'd make each individual theft too small to be worth investigating & wd certainly leverage the inevitable time lags of stock management. When no one even realizes there's been a robbery til weeks or months later, well - if an inventory falls in the warehouse, does anybody hear it??
Seems to me, though, that there must be social-engineering ways to block this. Maybe juggle schedules, such that individuals aren't always working with the same people; this would lessen the chance of like minds coming together to scheme. And it would increase paranoia, in a salutary way, changing the risk calculation for any would-be thief.
So would simple, frequent, irregular, unpredictable changes to process, protocol and procedure -- minor tweaks with no *apparent* effect on productivity, whose real purpose is just to negate the informational advantage that lets staff thievery succeed.
meanwhile, major corporations steal wages from workers (not to mention underpayment, and various other labor violations). So, tit for tat, except the crime by the corporations is on a much larger magnitude.
I wrote a paper in B school comparing Walmart to Costco. One conclusion my research led me to was that the shrinkage difference was in large part due to how the company treated its workforce. Treat them well, as Costco does, and they will be more vigilant towards shoplifters. Treat them like shit, as Walmart does (or did when I wrote the paper), and they’ll watch someone wheel a 50-inch TV out the door without paying.
Last point to recall: Costco isn’t trying to be a full service grocery store. They know you still need to go elsewhere for a few things, but Target and Walmart and trying to be your primary grocery store and thus stock food very differently.
It’s often said that having many choices does not necessarily improve life quality. You make a great point that offering variety does not necessarily improve company profits.
Great article, although it did give me flashbacks to my intro to accounting class with Cost of Goods Sold expense and inventory turnover ratio haha
Costco is similar to Sam's Club but they don't seem similar in compensation (in the 60 seconds of googling I just did when I thought of this). Of course the upper management mindset is WAY different, being that it's Walmart's mindset.
Yes, comparison to Sam's is what is missing from this analysis. Having been members at both at various times, I honestly don't understand why it is necessary for Sam's to suck so much worse than CostCo, or how Sam's even holds onto members in the markets where the two compete. Seems like mismanagement, pure and simple.
I've heard people make a Target vs. Wal-Mart comparison between CostCo and Sam's, but it's honestly more like Buc-ee's vs. a gas station where you have to ask for a key ("la llave") to use the toilet around the back that hasn't been cleaned since someone died of dysentery on it.
I can't think of another duopoly with a larger gap in quality between the two players.
FWIW, Sam’s is owned by Walmart - that’s why.
Costco also, at least by reputation, has much less employee theft, which is another component of "shrinkage".
It is routine for me to see Costco workers who have been there for over ten years, doing checkout. Low employee turnover is probably also a good sign.
Next doors to me have changed 4 times in the time I've lived in my house. Couple that were then when I moved in, the woman's mother worked in Costco and I still see her working there 35 years later - moved from till operator to till supervisor who also operates tills if needed. That's quite remarkable. Even the door security people I know by name - been working there years. Training loss must be minimal.
This was well done. Thank you kindly.
Well the flip side of fewer SKUs is that each one probably represents a bigger risk - Costco are probably significantly more conservative in what they stock.
This is addressed; they don't take risks. They stock things they have strong sales data on.
And you can pretty much guarantee that it's quality. Their buyers are exceptional.
Costco had thousands more items online too. They have less shrink because members know if you steal from them the membership costs will likely go up and you can get a membership level where you get a percentage back on what you’ve spent. Costco has better produce than most stores aside from Whole Foods. Costco is also great to kill a couple hours just walking around checking shit out.
It’s also notable that Costco exec salaries have a cap!