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  • Writer's pictureDavid Miller

Costco Employees - Success Secret An excerpt from David's book The Entrepreneurial Algorithm

The stack of job applications at your local Costco is an indicator of employee satisfaction and the company’s success with word-of-mouth marketing.

Trying to get a job at Costco is no easy task. They have the lowest turnover of any competitor. Employees that have been there for over a year, have an attrition rate of less than 6%. Compare this to over 16% with other retail employers. Many employees will start and finish their working careers at Costco, and most employee recommendations come from within. If you do land one of these coveted positions, you become a part of the secret of Costco’s success and you can proudly wear your nametag with your start date as Jim Sinegal did, ‘Since 1983’.

Costco employees are paid well. By industry standards, they are paid very well. Keeping the employees happy and motivated also supports the growth of the company, from entry-level positions all the way to corporate management. This alleviates the time, energy and money spent on training, and allows for a focused approach to building the quality of service they want their employees to provide. Costco is diligent in perfecting the overall shopping experience for their members.

Costco employees have excellent benefits. Their health benefits are ‘best in class’. They also have access to after-hour shopping with no crowds or line-ups. Another benefit is the exposure to a wide range of training in many different areas of the store, so the opportunity to rise up the ranks is easy and effective. On occasion it has even been reported, that they received free turkeys at Thanksgiving. It is these fringe benefits that make them feel valued as a person and get the Costco employee talking at the neighborhood BBQ.

Brotman was quoted saying their employee policies were designed so “people [could] have a great life and a great standard of living—to live their lives and to be able to give back to their communities.” The pride and respect for their employer is constantly nurtured, they feel appreciated, and are happy to share their enthusiasm with anyone and everyone. When you have created a well-defined brand and your employees understand the value to them and their customers, word-of-mouth marketing is at its best.

“I work at Costco.”

“What’s that like?”

“Well let me tell you all about it….”

In 1983, Costco emerged into a retail scene already populated with similar warehouse-style stores such as: Price Club, Sam’s Club (Walmart) and BJ’s Wholesale Club. Way back in the ‘80s before the internet was our best friend and hiring a gen-Z techie to do some pics and vids was an option, businesses were dependent on good old fashion advertising. Advertising budgets for similar businesses could range from expensive to knock your socks off expensive. In the eyes of Jim and Jeff, advertising just wasn’t going to fit into their squeaky tight bottom line. Costco had an aura that created a rare combination of exclusivity, familiarity, and customer service and respect. Their model was designed to attract customers through their meticulous branding and consequently word of mouth marketing. It was dominant in getting the first 200,000 Costco members in just over a year of existence and continues to this day.

Pause for a moment and reflect on that number: 0 to 200,000 in 12 months. Not only did they financially benefit from membership fees, but it also encouraged those members to shop at Costco more often in order to ‘justify’ paying for the membership. “We wouldn’t want it to go to waste!”

This strategy of business growth also ensured the right type of customers. Those that didn’t mind spending a bit extra for a membership, and exclusivity, represented the right kind of shoppers in a slightly higher income demographic. It added to the cache by creating the feeling that members were part of a special club, rewarded with the privilege to shop at Costco. “Members only shopping” contributed to Costco’s book value ringing in around $1 million by the end of 1984, based on operating just 3 stores. Nicely done. How did they do that again?

The Sinegal and Brotman duo made an excellent team and to model their success may prove to be an impossible task. Their complimentary skills supported the business partnership, along with their years of experience and intuition. That could be another chapter, or another book! What we can examine is some of the simple strategies they used by breaking down the structure and expectations they put in place.

After the unexpected passing of Jeff Brotman, on August 1st, 2017, Jim was reflective of their partnership and stated that despite the occasional “doosie of a disagreement”, they rarely stayed angry for more than a day. Possibly because they liked to hug-it-out, making it difficult to stay angry at someone you love and respect. Most importantly, the two business partners had their pillar of principles to fall back on to establish the best customer loyalty in all of retail.

Aligned in thought, the pair always operated as if they were a small company. They felt that investing in their people was the most important component of their operation, which resulted in this being the most expensive component as well. Dedicating 70% of their budget to put into their people assisted in building that proud Costco culture that is integral to their story - the story people share with others.

My wife and I had the pleasure of meeting someone who worked for the Costco Corporation. We had recently become one of those RV-owning gypsies traveling throughout the US and had rooted ourselves for a few weeks at a wonderfully simple, beachside state park in Florida. Avoiding the dark days of winter in the north, we had our compass set for warm.

Being landlocked in the middle of the continent for most of our lives, anything ‘ocean’ continued to leave us gasping for more. Even though the wave sounds that our Google home-mini had pumped out for the past year preparing us for our trip, we quickly learned it could not compare to the real thing. What the ocean delivered to us was the sounds, vistas, aromas, and resulting peace of mind. We also loved the fact that we could walk down the beach from our campsite and order up a basket of freshly caught, local, steamed shrimp at happy hour—another one of our favorite things.

One beautiful night, as we watched the sun set and the sky change around us, while indulging once again on the half-priced basket of happy hour shrimp, we started up a conversation with Peter, a fellow gypsy. He was also enjoying the wonders of this quaint beachside dining experience, alongside his trusted companion, a golden retriever named Bailey. He appreciated, just as we did, the proximity of this restaurant to the ocean and the state park we were all staying at. His mode of travel was a beach bike, which we found out, was from Costco. We immediately assumed he got a great deal on this solid set of stylish, yet functional wheels. We were also immediately envious, as being Costco members, it looked like we had missed out on a bargain. As we discovered, he was a fellow Canadian, and we were committed to sharing our particulars - home base, favorite spots we’ve traveled, where we’re headed next, and why we’re not home.

Peter’s current home was in Eastern Canada, but because of his job, he was rarely there. From how he described it, he had a bachelor’s dream gig. Contracted with Costco, his responsibilities were to run the featured product station, and travel from one store to the next throughout the country for 6 months of the year. The other 6 months left him, and Bailey, enjoying the beaches of Florida and other oceanfront locations. He liked his job. He really liked his job, obviously, because he wasn’t working when we met him, but rather enjoying happy hour shrimp and wine in Florida in the middle of December.

He did share with us the long hours he put in, and the tiring travel schedule, but he assured us he was well looked after by the company. Peter’s employer was happy to meet his needs for accommodation and all necessities so he could successfully and cheerfully carry out his merchandise demonstrations, day after day, week after week. In fact, he told us that one of his favorite places to stay was at the manager’s house in our current hometown in British Columbia. He explained that at this luxurious lakeside home he felt more comfortable and welcomed than at any hotel he had stayed. It was clear he was very happy with his work, and proud to be on the Costco roster. He gave you the sense that he was part of a big working family that perhaps filled a gap in his personal life. Regardless, Peter and his story were added to our own traveling tales, as well as a rekindled need for a trip to Costco.

The next day, as we were packing up and ready to move on to our next oceanfront site, Peter swung by on his ‘groovy’ beach bike to say goodbye. We were still a little envious of his bike. He told us it was actually a returned bike from one of the Costco stores he had worked at and they let him purchase it at a price that no beach-seeking gypsy could refuse. He added, that with the bike, came a margarita machine--another pang of envy from the two of us. The bike seemed pretty new, but it also could have been several years old, as Costco has one of the most lenient return policies of any company. You could return a couch after sitting on it for 5 years, with no questions asked. He threw in a few examples of this while waving his hand, as if to say there are so many stories, he just didn’t have enough time to rave on about them.

Peter wished us well and said goodbye as he rode off to enjoy the remainder of his 6 months rest before he was back on the Costco floor, selling the next greatest must-have item. We will be keeping our eyes open for this well versed Costco ambassador at our next beach stop, as well as the next time we visit a Costco store in Canada.

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