The Trader Joe's Lesson: How to Pay a Living Wage and Still Make Money in Retail - Polidicks

[quote]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. "Retailers start with this philosophy of seeing employees as a cost to be minimized," says Zeynep Ton of MIT's Sloan School of Management. That can lead businesses into a vicious cycle. Underinvestment in workers can result in operational problems in stores, which decrease sales. And low sales often lead companies to slash labor costs even further. Middle-income jobs have declined recently as a share of total employment, as many employers have turned full-time jobs into part-time positions with no benefits and unpredictable schedules. QuikTrip, Trader Joe's, and Costco operate on a different model, Ton says. "They start with the mentality of seeing employees as assets to be maximized," she says. As a result, their stores boast better operational efficiency and customer service, and those result in better sales. QuikTrip sales per labor hour are two-thirds higher than the average convenience-store chain, Ton found, and sales per square foot are over 50 percent higher. [/quote] [url]http://www.theatlantic.com/business/archive/2013/03/the-trader-joes-lesson-how-to-pay-a-living-wage-and-still-make-money-in-retail/274322/[/url] I wonder if a lot of this is caused simply because the stock market as a whole encourages companies to just cut costs and make their quarterly profits look pretty versus actually investing in your company and employees for long term success.

[QUOTE=KorJax;40035747][url]http://www.theatlantic.com/business/archive/2013/03/the-trader-joes-lesson-how-to-pay-a-living-wage-and-still-make-money-in-retail/274322/[/url] I wonder if a lot of this is caused simply because the stock market as a whole encourages companies to just cut costs and make their quarterly profits look pretty versus actually investing in your company and employees for long term success.[/QUOTE] Quite possibly - Corporate culture (Stocks in corporations, board of directors, etc) encourages an attitude where bottom line is raised as quickly to make more profit so that you have immediate results to show investors. Interestingly enough, investor culture seems to belie investing in your employees.

As far as I can tell ASDA (The UK branch of Walmart) is a relatively good employer in terms of employee investment and how they treat their staff, especially in comparison to other supermarket chains in the country. Of course Walmart is absolutely notorious for mistreating their staff but it is worth noting that ASDA is the most profitable international investment Walmart has. If more companies could figure out that treating your workforce like shit isn't needed to turn a decent profit then maybe working retail wouldn't be as mind crushingly terrible as it is.

According to some haphazard googling I've just finished doing it costs about 150% of an employee's yearly pay to replace someone who quits. (That's entry-level, it's even more for managerial) If you're able to keep employees for more than a year you're probably a good employer, so it stands to reason that if you're not a good employer you're doing the equivalent of paying everyone twice. It seems to be common sense that treating your employees well (which includes paying them adequately) is the smart move because it [i]saves money[/i]. So why are large companies that do it the exception?

[QUOTE=Zeke129;40035971]According to some haphazard googling I've just finished doing it costs about 150% of an employee's yearly pay to replace someone who quits. (That's entry-level, it's even more for managerial) If you're able to keep employees for more than a year you're probably a good employer, so it stands to reason that if you're not a good employer you're doing the equivalent of paying everyone twice. It seems to be common sense that treating your employees well (which includes paying them adequately) is the smart move because it [i]saves money[/i]. So why are large companies that do it the exception?[/QUOTE] More immediate returns to keep investors happy as opposed to long term financial gain.

[QUOTE=Zeke129;40035971]So why are large companies that do it the exception?[/QUOTE] they aren't?