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 that they were leading the way to the magic “$15/hour” at all locations along with benefits and skills training. Though Amazon did not mention that they needed to hire a lot of folks fast, that they are trying to charm democrats who want to break-them up for being evil, or that their $200-400 million automated warehouses can be shut down if they do get unions.

Newsflash: Has Amazon worked workers too hard in Bessemer, AL where a unionization vote is underway?    

Simultaneously, why did Costco announce a new minimum wage of $16/hour with good benefits? No surprise — they have had the highest wage scale within retail America since their founding. How exactly do they sell commodities at a 13% margin, pay great and still financially thrive? Best-service pay logic!  

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, they cross-train 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 (v 30 to 60%) for retail in general;
  • .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, you can measure and grow gross-profit dollars per head to afford higher wages by working smarter.

For help is 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!