How to Pay a Living Wage and Still Make Money in Retail

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How to Pay a Living Wage and Still Make Money in Retail

#1  Postby Loren Michael » Mar 26, 2013 11:09 am

http://www.theatlantic.com/business/arc ... il/274322/

The average American cashier makes $20,230 a year, a salary that in a single-earner household would leave a family of four living under the poverty line. But if he works the cash registers at QuikTrip, it's an entirely different story. The convenience-store and gas-station chain offers entry-level employees an annual salary of around $40,000, plus benefits. Those high wages didn't stop QuikTrip from prospering in a hostile economic climate. While other low-cost retailers spent the recession laying off staff and shuttering stores, QuikTrip expanded to its current 645 locations across 11 states.

Many employers believe that one of the best ways to raise their profit margin is to cut labor costs. But companies like QuikTrip, the grocery-store chain Trader Joe's, and Costco Wholesale are proving that the decision to offer low wages is a choice, not an economic necessity. All three are low-cost retailers, a sector that is traditionally known for relying on part-time, low-paid employees. Yet these companies have all found that the act of valuing workers can pay off in the form of increased sales and productivity.


I'm not directly familiar with the stores used as examples in this article, but I'm reasonably well-read about them.

This was a comment that basically summed up my problems with this article:

I think the comparisons are way off. Firstly the failure of Borders and Circuit city have nothing to do with their employees. They are in profoundly distressed sectors essentially ended by internet purchasing.

Then you have Costco and trader joes, which simply cant be compared to Walmart or the large chain grocery stores. When Costco cant dictate prices at extremely low costs they drop the item. People don't go into costco expecting to get a specific item. Costcos buyers are opportunistic and so are Costco shoppers. that is a great experience -- when it works.
Trader Joes is an expensive niche outlet. Yes they have good prices on dried fruit roll for my kids, and sell some very mediocre wine cheaply . Their produce is much more expensive than anywhere else (large chain grocery or WF) as are their general staples. Trader Joes seems inexpensive when it is killing the independent or bodega grocery store in an urban area but it is much more expensive than the large chains groceries

Paying higher wages may or may not be better for everyone, but the article goes nowhere in attempting to establish the thesis it began with. The article just establishes that the Atlantic's demographic (and at least one reporter) by and large has no idea of actual grocery staple prices because they dont need to
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Re: How to Pay a Living Wage and Still Make Money in Retail

#2  Postby Scot Dutchy » Mar 26, 2013 11:20 am

I only know that here the major supermarket chain Aalbert Heijn employs its part time staff from students at graamar schools.
They pay them above the norm wages.

They learn much quicker, make fewer mistakes and are more dilligent
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Re: How to Pay a Living Wage and Still Make Money in Retail

#3  Postby Loren Michael » Mar 26, 2013 11:42 am

Scot Dutchy wrote:I only know that here the major supermarket chain Aalbert Heijn employs its part time staff from students at graamar schools.
They pay them above the norm wages.

They learn much quicker, make fewer mistakes and are more dilligent


Yeah, I don't doubt the quality gains, but it seems like there's a premium that gets passed on to the customer.

I think in places that don't have a serious poverty problem - I'm under the impression that large chunks of Northern Europe are this way - this is probably a valid way for a good deal of retail places to be.

In places with serious poverty problems, poor people get priced out of things like food.

I guess I see these places as one of the benefits societies get from eliminating poverty. I don't see these places as engines of poverty elimination.
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Re: How to Pay a Living Wage and Still Make Money in Retail

#4  Postby Scot Dutchy » Mar 26, 2013 12:40 pm

No premium is passed on I can assure. AH prices are as competitive as the other chains who rely on the less educted and less trustworthy students from lower schools.

I dont know much about poverty. There is not much around here with our social services.
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Re: How to Pay a Living Wage and Still Make Money in Retail

#5  Postby I'm With Stupid » Mar 26, 2013 12:49 pm

Aldi famously pay much more than other retailers in the UK. They do expect their workers to do more though. But they have managed to take a massive chunk of the market during the recession by undercutting the likes of Tesco and Asda (Walmart). So it seems clear that you can pay decent wages without pricing people out of the market. They're certainly not the only budget retailer to pay very good wages.
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Re: How to Pay a Living Wage and Still Make Money in Retail

#6  Postby Thomas Eshuis » Mar 26, 2013 12:53 pm

Scot Dutchy wrote:No premium is passed on I can assure. AH prices are as competitive as the other chains who rely on the less educted and less trustworthy students from lower schools.

I dont know much about poverty. There is not much around here with our social services.

That's not true Scot, the AH is more expensive on average than the C1000, Jumbo and Plus stores. Especially their own brand products are more expensive.
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Re: How to Pay a Living Wage and Still Make Money in Retail

#7  Postby Loren Michael » Mar 26, 2013 1:16 pm

I'm With Stupid wrote:Aldi famously pay much more than other retailers in the UK. They do expect their workers to do more though. But they have managed to take a massive chunk of the market during the recession by undercutting the likes of Tesco and Asda (Walmart). So it seems clear that you can pay decent wages without pricing people out of the market. They're certainly not the only budget retailer to pay very good wages.


An individual firm's success isn't necessarily indicative of not pricing people out.

Abstract example: Walmart absent competition is going to appeal to everyone, by necessity. Adding a Trader Joe's to the mix captures market share from Walmart in the form of people who are willing to pay the premiums and/or more limited selection for the higher quality of service or goods or whatever. Everyone else still shops at Walmart, either by price necessity or because they don't value the extras that Trader Joe's adds or etc.

That said, you may be correct. Walmart supported a minimum wage hike a short while ago, suggesting that they could almost certainly pay more to their employees. I have no idea about the degree of that being passed on the the consumer though.
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Re: How to Pay a Living Wage and Still Make Money in Retail

#8  Postby Scot Dutchy » Mar 26, 2013 2:30 pm

Thomas Eshuis wrote:
Scot Dutchy wrote:No premium is passed on I can assure. AH prices are as competitive as the other chains who rely on the less educted and less trustworthy students from lower schools.

I dont know much about poverty. There is not much around here with our social services.

That's not true Scot, the AH is more expensive on average than the C1000, Jumbo and Plus stores. Especially their own brand products are more expensive.


I did not say cheaper did I? Competitive is what I said which for me includes quality to price ratio.

To be honest I never shop anywhere else except now and again in the organic supermarket. I am also sceptical about the claims made by these other chains. In our shopping street we only have Appie and I am quite happy about that.
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Re: How to Pay a Living Wage and Still Make Money in Retail

#9  Postby Thomas Eshuis » Mar 26, 2013 2:35 pm

Scot Dutchy wrote:
Thomas Eshuis wrote:
Scot Dutchy wrote:No premium is passed on I can assure. AH prices are as competitive as the other chains who rely on the less educted and less trustworthy students from lower schools.

I dont know much about poverty. There is not much around here with our social services.

That's not true Scot, the AH is more expensive on average than the C1000, Jumbo and Plus stores. Especially their own brand products are more expensive.

To be honest I never shop anywhere else except now and again in the organic supermarket. I am also sceptical about the claims made by these other chains. In our shopping street we only have Appie and I am quite happy about that.

We only shop at AH for items they don't have at the supermarket in our neighbourhood.
"Respect for personal beliefs = "I am going to tell you all what I think of YOU, but don't dare retort and tell what you think of ME because...it's my personal belief". Hmm. A bully's charter and no mistake."
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Re: How to Pay a Living Wage and Still Make Money in Retail

#10  Postby Scot Dutchy » Mar 26, 2013 2:37 pm

Thomas Eshuis wrote:
Scot Dutchy wrote:
Thomas Eshuis wrote:
Scot Dutchy wrote:No premium is passed on I can assure. AH prices are as competitive as the other chains who rely on the less educted and less trustworthy students from lower schools.

I dont know much about poverty. There is not much around here with our social services.

That's not true Scot, the AH is more expensive on average than the C1000, Jumbo and Plus stores. Especially their own brand products are more expensive.

To be honest I never shop anywhere else except now and again in the organic supermarket. I am also sceptical about the claims made by these other chains. In our shopping street we only have Appie and I am quite happy about that.

We only shop at AH for items they don't have at the supermarket in our neighbourhood.


Appie is the only supermarket in my neighbourhood. C1000 did try and failed. Wrong neighbourhood.
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Re: How to Pay a Living Wage and Still Make Money in Retail

#11  Postby Nicko » Mar 26, 2013 2:50 pm

I'm With Stupid wrote:Aldi famously pay much more than other retailers in the UK. They do expect their workers to do more though. But they have managed to take a massive chunk of the market during the recession by undercutting the likes of Tesco and Asda (Walmart). So it seems clear that you can pay decent wages without pricing people out of the market. They're certainly not the only budget retailer to pay very good wages.


It's the old adage, "If you pay peanuts; you get monkeys."

Some organisations want "monkeys". They are perfectly happy to pay the bare minimum for staff who are indifferent at and to their jobs and who move on the second they get a better opportunity.

Some want workers who care about their jobs and want a career with the organisation and are prepared to pay to keep them. Even a position like shelf stacker in a supermarket represents a financial investment by the supermarket in that worker. If they just have to invest in another worker when the first moves on to a better offer, they are needlessly duplicating the training costs. Far better to invest that money in wages and hire people who want to stay with the company.
Last edited by Nicko on Mar 26, 2013 2:58 pm, edited 1 time in total.
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Re: How to Pay a Living Wage and Still Make Money in Retail

#12  Postby Nicko » Mar 26, 2013 2:56 pm

Loren Michael wrote:That said, you may be correct. Walmart supported a minimum wage hike a short while ago, suggesting that they could almost certainly pay more to their employees. I have no idea about the degree of that being passed on the the consumer though.


Walmart will always pay the least it can get away with to its workers. That is, it will only raise the amount of money it pays to the bottom tier of employees if it is - and therefore its competitors are - required to do so. It's market share is such, however, that a minimum wage hike would hurt its competitors worse than it. Hence support for minimum wage hike: Walmart can afford it, its direct competitors can't.
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Re: How to Pay a Living Wage and Still Make Money in Retail

#13  Postby Loren Michael » Mar 26, 2013 4:08 pm

Nicko wrote:
Loren Michael wrote:That said, you may be correct. Walmart supported a minimum wage hike a short while ago, suggesting that they could almost certainly pay more to their employees. I have no idea about the degree of that being passed on the the consumer though.


Walmart will always pay the least it can get away with to its workers. That is, it will only raise the amount of money it pays to the bottom tier of employees if it is - and therefore its competitors are - required to do so. It's market share is such, however, that a minimum wage hike would hurt its competitors worse than it. Hence support for minimum wage hike: Walmart can afford it, its direct competitors can't.


:(

I was keeping that in my pocket for when someone said "wait, why is Walmart supporting a minimum wage hike?"

I hate you now.
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Re: How to Pay a Living Wage and Still Make Money in Retail

#14  Postby GT2211 » Mar 27, 2013 3:25 am

Its why unions support it as well.
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Re: How to Pay a Living Wage and Still Make Money in Retail

#15  Postby Nicko » Mar 28, 2013 11:51 am

GT2211 wrote:Its why unions support it as well.


Could you expand on that please?
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Re: How to Pay a Living Wage and Still Make Money in Retail

#16  Postby Horwood Beer-Master » Mar 28, 2013 11:01 pm

For John Lewis "making money" and "decent pay" are one and the same thing. That's what happens when the staff own the business.


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Re: How to Pay a Living Wage and Still Make Money in Retail

#17  Postby Loren Michael » Mar 29, 2013 1:58 am

Nicko wrote:
GT2211 wrote:Its why unions support it as well.


Could you expand on that please?


Unions are generally already well above the minimum wage. A minimum wage raises union rivals' costs.
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Re: How to Pay a Living Wage and Still Make Money in Retail

#18  Postby james1v » Mar 29, 2013 2:14 am

When an employer pays a living wage, that means the employee doesn't need to claim benefits from the state, it has to make that employee more loyal, more happy... Claiming benefits, is a chore. Demeaning. Employers who dont pay a living wage, should be named and shamed. Boycotted. Just my opinion. I dont understand how a multinational, rich company, gets away with paying poverty wages, with permission from the state. Barking mad! :scratch:
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Re: How to Pay a Living Wage and Still Make Money in Retail

#19  Postby iamthereforeithink » Mar 29, 2013 6:52 am

First off, I agree with the broad premise of the article, although some conclusions are unjustified extrapolations. The impact of Direct Labor wages on a company's profitability is, in most cases, hugely exaggerated. If you carefully scrutinize the financial statements of most companies, you will find that the contribution of "direct labor" to the cost of a given product is negligible. Yet most companies put an inordinate amount of focus on squeezing more out of this particular cost component. However, the negative impact of squeezing DL wages due to poorer customer experience , quality losses, high attrition, retraining costs etc. can hugely outweigh any cost savings obtained. Most companies just don't seem to realize this.

Loren Michael wrote:
I'm not directly familiar with the stores used as examples in this article, but I'm reasonably well-read about them.

This was a comment that basically summed up my problems with this article:

[i]I think the comparisons are way off. Firstly the failure of Borders and Circuit city have nothing to do with their employees. They are in profoundly distressed sectors essentially ended by internet purchasing.


There is never just one factor that contributes to a company's downfall. Usually, a negative feedback loop involving a multiplicity of causes is involved. In the case of Circuit city and Borders, the advent of e-commerce certainly was a major factor influencing their downfall, but they had opportunities to re-invent themselves that they didn't take up, and squeezing DL costs certainly wouldn't have helped them to survive. Face-to-face customer interaction experience was their primary USP. If they didn't get that right, then they were doomed anyway. If they were putting a squeeze on DL costs at that time, it would definitely have come at the cost of customer experience. Why didn't Best Buy, for example, bite the dust at the same time as Circuit City?

Then you have Costco and trader joes, which simply cant be compared to Walmart or the large chain grocery stores. When Costco cant dictate prices at extremely low costs they drop the item. People don't go into costco expecting to get a specific item. Costcos buyers are opportunistic and so are Costco shoppers. that is a great experience -- when it works.
Trader Joes is an expensive niche outlet. Yes they have good prices on dried fruit roll for my kids, and sell some very mediocre wine cheaply . Their produce is much more expensive than anywhere else (large chain grocery or WF) as are their general staples. Trader Joes seems inexpensive when it is killing the independent or bodega grocery store in an urban area but it is much more expensive than the large chains groceries


The above doesn't seem to make any sense, or constitute an argument. Costco is able to offer low prices like Walmart without paying abysmally low DL wages. They do it through SKU optimization and Supply Chain innovation. DL cost don't actually have as huge an impact on Walmart or Costco's ability to provide low prices as is popularly believed. Trader Joe's secret of success is specifically it's customer experience. The quality and training of its direct labor is a key component of the customer experience. And its products are definitely not exorbitantly more expensive than the competition. They seem to charge a small premium for the better customer experience, but I am highly doubtful that they are forced to charge a premium due to higher DL costs. Its more likely the case that if they charge 5 cents more than the competition, then 1 cent is the contribution of higher DL costs and the remaining 4 cents generates a profit premium over the competition.
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