Red vs. Blue: The Economic Disparity of Wal-Mart and Costco
There are a couple of great new articles out about the differences in the economies of Wal-Mart and Costco (which began in Seattle), including one in my hometown Seattle Weekly, which focuses on the company's core values (i.e., be good to both your customers and your employees):

the company has become an icon of what are known around business schools as "high-road" values. Forget Ben & Jerry's, now under new management that's not quite as progressive as its hippie founders. Costco is a retailer of ever-growing size with, according to the latest figures, $47 billion in annual revenue, 113,000 employees, and 449 warehouses internationally in locations including the United Kingdom, Japan, and Mexico. It walks the walk on a whole different scale. Costco's values stand out all the more because they contrast dramatically with those of its main competitor, Wal-Mart, which operates the 550-store warehouse chain Sam's Club.

As many have recently noted, Wal-Mart's business model relies on relentless cost-cutting. According to Wal-Mart, its 1.2 million U.S. employees earn an average of $9.99 an hour, less than two thirds of Costco's average. Only 42 percent of Wal-Mart's workers have health care coverage through the company, compared with more than 83 percent at Costco.

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[Peter] Cappelli (a professor of management at the Wharton School) suspects that when you probe the differences between Costco and Wal-Mart, as he plans to do, you will find that their opposing business practices stem from differences in their respective businesses. Costco charges a membership fee to shop there ($45 a year); Wal-Mart doesn't. Costco, fittingly clustered largely along the blue-state coasts, caters to an affluent urbanite crowd. Wal-Mart, a red-state company in every way, canvases small towns and rural areas across the heartland of America, attracting shoppers who are often literally desperate for low prices. Even Sam's Club, which like Costco, charges an annual membership fee ($35), sticks close to Wal-Mart's geographic base. Wal-Mart agrees with Cappelli that such differences make a wage comparison between it and Costco misleading.

Contrast that with a study about the typical Wal-Mart shopper from this Down and Out in Discount America in The Nation:

A 2000 study by Andrew Franklin, then an economist at the University of Connecticut, showed that Wal-Mart operated primarily in poor and working-class communities, finding, in the bone-dry language of his discipline, "a significant negative relationship between median household income and Wal-Mart's presence in the market." Although fancy retailers noted with chagrin during the 2001 recession that absolutely everybody shops at Wal-Mart--"Even people with $100,000 incomes now shop at Wal-Mart," a PR flack for one upscale mall fumed--the Bloomingdale's set is not the discounter's primary market, and probably never will be. Only 6 percent of Wal-Mart shoppers have annual family incomes of more than $100,000. A 2003 study found that 23 percent of Wal-Mart Supercenter customers live on incomes of less than $25,000 a year. More than 20 percent of Wal-Mart shoppers have no bank account, long considered a sign of dire poverty. And while almost half of Wal-Mart Supercenter customers are blue-collar workers and their families, 20 percent are unemployed or elderly.

The article goes on to focus on how Wal-Mart depends on women to staff the stores, yet continues to to shit on them with low wages and sex discrimination. Wal-Mart also depends on women shoppers, not only to buy goods but to change attitudes in communities that a Wal-Mart would be good to have. And then there's the public assistance angle (which I've covered previously):

Wal-Mart spokespeople have denied that the company encourages employees to collect public assistance, but the documents speak for themselves. They bear the Wal-Mart logo, and one is labeled "Wal-Mart: Instructions for Associates." Both documents instruct employees in procedures for applying to "Social Service Agencies." Most Wal-Mart workers I've interviewed had co-workers who worked full time for the company and received public assistance, and some had been in that situation themselves. Public assistance is very clearly part of the retailer's cost-cutting strategy. (It's ironic that a company so dependent on the public dole supports so many right-wing politicians who'd like to dismantle the welfare state.)

[California Assemblywoman Sally] Lieber, a strong supporter of the social safety net who is now assistant speaker pro tempore of the California Assembly, last year passed a bill that would require large and mid-sized corporations that fail to provide decent, affordable health insurance to reimburse local governments for the cost of providing public assistance for those workers. When the bill passed, its opponents decided to kill it by bringing it to a statewide referendum. Wal-Mart, which just began opening Supercenters in California this year, mobilized its resources to revoke the law on election day this November, even while executives denied that any of their employees depended on public assistance.

While we're on the subject of Costco, here's an interesting article from AlterNet about how the Japanese market is embracing the super-sized, big-box mentality of Costco, which recently opened its third Japanese store in Yokohama:

For SUV-owning Americans, with our extra freezers and basement pantries, such consumption fuels a super-sized, high caloric lifestyle. But how exactly were these Japanese customers cooking those enormous pizzas, storing those giant mustard jars, and eating those gigantic cuts of meat?

After all, the average Tokyo apartment is so small that it can make even a New Yorker feel like a caged animal. And only a cooking-averse undergraduate could love the typical Japanese kitchenette with its half-size refrigerator and an oven that can grill fish but not much more. To get around the lack of storage space, Tokyo shoppers shop more frequently than their American counterparts and tend to buy a lot of fresh food at local stores. The size of the classic Japanese meal – a few pieces of raw fish or a modest bowl of noodle soup – contrasts sharply with such American faves as the double bacon cheeseburger or the all-you-can-eat breakfast buffet.

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Thanks to an influx of American-style food, Japan is changing. In the 20 years from 1980 to 1999, Japanese spending on fresh produce dropped 10 percent, while expenditures on Western processed foods jumped 20 percent. Over the same two decades, obesity figures for Japanese males rose 40 percent. In the last 40 years, obesity in the population as a whole has more than tripled.

Despite these changes, obesity rates in Japan remain the lowest in the industrialized world. Relatively thin people who are spending a lot on food? Talk about opportunities for growth. After the United States pressured Japan to change its Large Scale Retail Store Law in 1990, food discounters like Costco and the French giant Carrefour rushed in to teach Japanese how to consume properly.

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For now, Japanese shoppers have figured out a way around the Costco strategy. They buy Costco's large quantities and split them up among friends and families. In the United States, analysts refer to Costco's "treasure hunt" dynamic, for you never know what you might find for sale. In Japan, it's more like a big game hunt, with the prey divvied up at home among the inner circle.

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Despite these indications that the hypermarket model may have hit its limits, both the volume of sales figures at Costco and the types of products the Japanese are buying suggest otherwise. The company is set to move into the black this year in its overall Japanese operations. And, in a sign that bigger sales volumes are ahead, Ken Theriault reports that freezers and storage units are big Costco sellers. Today the Japanese are engaging in the un-American habit of sharing; tomorrow they won't have to.