Recessions are also a time when employers don’t necessarily have a lot of profits to give up. Walmart’s $446 billion of revenue last year was eye-popping, but its profit margins are far from fat—between 3% to 3.5%. If they cut that down by a percentage point—about what retailers like Costco and Macy’s have been bringing in—that would give each Walmart employee about $2850 a year, which is substantial but far from life-changing. Further wage improvements would have to come out of the pockets of Walmart’s extremely price conscious shoppers. Which might be difficult, given how many product categories Amazon is pushing into.
Quite possibly so, but I’m not actually sure how well this argument really works. It would be a good argument in the case of, say, steel plants or automakers, where the business models are all about the same. But Walmart is not just a poor man’s Costco. They’re very different businesses, with very different labor models, demographics, and revenue streams. And those things work together: the fact that Costco is doing great with a given labor model or profit margin does not therefore mean that Walmart could easily follow the same course. With depressing regularity, you see pundits and activists asking “Why can’t Walmart be more like Costco,” which is a little like asking why Malcolm Gladwell can’t be more like Michael Jordan. I mean … um … where do I even start?
I am lucky enough to be more prosperous than the average Wal-Mart employee, but if I saw a pile of 28 Benjamins on the sidewalk, I’d pick it up. I guess that’s the difference between me n’ Megan McArdle.
*Among other things, Megan “explains” that Costco is “really” a grocery store (I did not know that), while Wal-Mart is “technically” a department store. Sort of like Macy’s, right, Megan? You know, the store that, in your original post, you said had a profit margin comparable to Costco rather than, you know, Wal-Mart.
