Costco, unlike many of its retail rivals, has generally been considered a good place to work.
The warehouse club has always paid higher-than-average wages as its leadership seems to understand the value of holding on to workers. That's especially evident when you consider the career trajectory of its new chief executive, Ron Vachris.
"Ron is a Costco veteran, with over 40 years of service to the company, starting as a forklift driver, and subsequently serving in every major role related to Costco's business operations and merchandising activities," the company said in a news release.
Related: Amazon closes a business designed to take on Kroger, Walmart
That's not a common path to the top job at any company, but Costco has generally done a good job of retaining staff. The warehouse club has an "A" rating on Comparably's tracking of companies' retention of workers.
"Costco is in the top 10% of similar-sized companies in its ability to retain quality employees. 58% of employees would not leave Costco if they were offered a job for more money while 68% are excited to go to work each day," Comparably said.
The chain also ranked No. 1 compared with its competitors, which include Walmart, Amazon, Best Buy and Target.
Costco, however, now faces a challenge that could affect how it retains its employees and operates its business.
Image source: Brooks Kraft LLC/Corbis via Getty Images
Costco store joins the Teamsters union
Businesses generally don't want their workers to join unions. Even progressive companies like Starbucks would prefer not to have a third party involved in its relationship with its workers.
Starbucks has actively fought to keep unions out of its stores and has been accused of closing some locations that opted to unionize (charges the company has denied).
Costco has taken a different approach to unionization of its stores after the Christmas Eve decision by one location to join the Teamsters Union.
"Costco workers in Norfolk, Va., voted overwhelmingly yesterday to join Teamsters Local 822, marking the union's first organizing victory at the wholesale retailer in two decades," according to a statement from the Teamsters union. "The 238-worker group seeks strong representation to address years of concerns and improve working conditions."
The chain's management has offered a softer response to employees voting in favor of joining the Teamsters than many other retailers would. Former CEO Craig Jelinek and Vachris addressed the union issue in a memo sent to all U.S. employees.
“The fact that a majority of Norfolk employees felt that they wanted or needed a union constitutes a failure on our part,” they wrote in a memo dated Dec. 29.
Costco could lose a competitive edge
Costco has built its business on leveraging its edges over rivals like Walmart, Target and Kroger. Recently, for example, Chief Financial Officer Richard Galanti pointed out that retail theft — something pretty much every other retailer has complained about as a drag on profits — has not been a significant factor for the warehouse club.
"First, we are asked often about our inventory shrinkage results and whether it has dramatically increased in the past year versus historical shrink results. The answer is no," he said during his company's fourth-quarter earnings call. "In the past several years, our inventory shrink has increased by a couple of basis points, in part, we believe, due to the rollout of self-checkout."
In this case, Costco's relationship with its members gives it an edge over its rivals. Retaining employees has also been a major edge for the brand, which has relatively light staffing compared with its rivals.
If more stores join unionize and Walmart, Target and Amazon remain mostly free of unions, that could take away a key Costco advantage. A union adds a third party to the table and it could drive labor costs higher at a chain that has generally paid well compared with other retailers.
Costco carefully manages every penny it spends. Unionization threatens its control over labor costs and represents a clear risk for the company in numerous ways as has been illustrated by Starbucks's many missteps.
It's also possible that this win emboldens the Teamsters to go after other retailers.
“Their No. 1 target by far is Amazon followed by Walmart,” Burt Flickinger, managing director of retail consultancy Strategic Resource Group, told WTOP.
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