The “$15/hour living wage” movement will continue. It will buy votes, liquidate jobs and boost McDonald’s prices more than the new, net wages. Although many voters are weak at system-thinking math, Amazon and Costco are not.
Last fall, Amazon bragged they were leading the way to the magic “$15/hour” at all locations along with benefits and skills training. Though Amazon did not mention it needed to hire a lot of folks fast, that it is trying to charm democrats who want to break-it up for being evil, or that its $200-400 million automated warehouses can be shut down if they do get unions.
Newsflash: Has Amazon worked workers too hard in Bessemer, Alabama, where a unionization vote is underway?
Simultaneously, why did Costco announce a new minimum wage of $16/hour with good benefits? No surprise — Costco has had the highest wage scale within retail America since its founding. How exactly does it sell commodities at a 13% margin, pay great and still financially thrive? Best-service pay logic!
Photo courtesy BrianAJackson, iStock / Getty Images Plus
Like Amazon, Costco pays the most to hire the best work ethic, and to get best service quality execution that wins best customer loyalty and growth. In addition, it cross-trains to deliver more services with an inclusive culture and daily contact with happy customers. The financial results:
157% margin dollars per head;
For 141% of the average compensation for an area job niche;
6% annual turnover rate versus 30% to 60% for retail in general;
0.12% theft/shrinkage (a retail best);
Best customer retention/growth; and
A great ROI.
Options for distributors
Distributors can choose to pay average compensation to get average work ethic and service quality, and then be a price-taker that gets weak profits, growth and innovative-change ability. Or, distributors can measure and grow gross-profit dollars per head to afford higher wages by working smarter.
For help doing the latter, read my blogs 48 and 170. For a full-journey recipe, skim my “Core Renewal Roadmap.”
Pursuing penny-wise, service mediocracy will not allow you to both excel and make the digital changes that your best suppliers and customers are expecting. Choosing the status quo is more risky than experimenting towards Costco’s service-excellence math!
Longtime industry consultant Bruce Merrifield is an expert on high-performance service management and is one of the most successful turnaround advisors for wholesale-distribution companies and channels. Each month Bruce will answer your distribution-related business questions here.
