Is Walmart Doomed By Its Own Business Model?

walmartThat’s what the folks at Addicting Info think. What are your thoughts?

There are memes floating around the Internet regarding Walmart’s employment model vs. Costco’s employment model, and how Costco’s profits have gone up while Walmart is finding itself in trouble. People are calling on Walmart to pay its employees living wages, saying that if Costco, Trader Joe’s, Wegman’s, and more, can do it and still turn hefty profits, then Walmart should have no problems with it. Then there are those on Walmart’s side of the issue (which are many), who believe that no company should have to pay what they consider “high wages” for unskilled labor.

However, there’s another way to look at it, which is from a business standpoint. Here’s what happens: You keep your employees happy by paying them a living wage and providing benefits, and generally treating them well at all levels, to keep their morale up. They, in turn, become more productive employees and, because they have a good job, are less likely to leave the instant something else comes along.

This, in turn, drives down your turnover costs. As businesses *ought* to know, turnover costs more money than investing in your workforce does. You have lost productivity during the hiring and training process, higher recruiting costs, and more, averaging to about 20% of an employee’s annual pay, for jobs that pay $50,000 per year or less. For jobs paying $30,000 per year or less, replacing one employee amounts to roughly 16% of their annual salary, but if your turnover is even 30% per year, which is lower than average turnover across the food service and hospitality industries, that still adds up.

Roughly 70% of Walmart employees leave within the first year, meaning most, if not all, Walmart stores have near-constant turnover.

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49 Comments on "Is Walmart Doomed By Its Own Business Model?"

  1. emperorreagan | Jul 18, 2013 at 4:12 pm |

    What, you need to keep your workforce? You don’t want to be the place people work while they’re waiting to get a call from UPS or the local grocery store? Maybe you even pay them enough so they can afford to buy your shit? What kind of witchcraft are you suggesting?!

  2. Cortacespedes | Jul 18, 2013 at 4:21 pm |

    No such thing as “unskilled labor” as the high cost of turnover illustrates.

    • Customer service does takes skill. Maybe not like a craft, and maybe it’s the skill of biting your pride while taking shit from the bastard management and or customers. It’s still a skill set though.

      [edit] added does

    • My husband worked for Walmart for a short period of time. they didn’t even bother to tell him that they were only hiring to get through the holiday. They didn’t tell him that they didn’t need him anymore. They just stopped putting him on the schedule. My husband is a professional chef with a Bachelors in Business and a bachelors in marketing, with over 30 years in the restaurant business. He was only making $7.50 an hour to serve chicken or whatever behind the deli counter. The management recognized he had experience, as suddenly the chicken was not being overcooked in the friers and he seemed to ‘catch on’ faster than average. He wasn’t going to tell them that he was a pro, because then he wouldn’t have been hired at all, because the management is always afraid someone is going to do something better than they, or make improvements, and either take their job or put their job in jepardy. I’ve very rarely ever seen anyone reach a 2-year anniversary working for Walmart.

  3. When you’re the place no one wants to work, you’re also the place that has the workers no one else wants.

    • Cortacespedes | Jul 18, 2013 at 4:47 pm |

      Unless, you’re the only game in town due to the “big box” effect on rural communities.

      • Anarchy Pony | Jul 18, 2013 at 4:50 pm |

        Goddamn money funnels!

      • Of course, and all the smart & talented ‘brain-drain’ to other areas of the country that have more opportunity. But even with the truth of your statement I doubt rural Walmarts are staffed with the best and the brightest of whomever is left.

    • I think some people apply because Walmart is hiring, due to the high turnover rate. So they may be decent workers, but have little incentive to give 100%.

      • I agree. But my point is that those whom have
        knowledge and skills that can be applied and the desire to use them…will probably, eventually, go somewhere else. Which I believe is exemplified by their high turnover. I would expect the byproduct of that is those that are willing to put up with the poor pay and oppressive policies of walmart for the long term perhaps don’t have as many options.

        • You could say they prey on the down and out, and they rub salt in the wounds daily. Then they tell you to smile, but this is most retail jobs. Waldemort has it down to a science though. Sam Walton is turning in his grave, for what his kids have turned his business into. He was all about community, and giving back.

        • Ted Heistman | Jul 18, 2013 at 9:03 pm |

          There are lots of smart people with shit jobs. There aren’t enough good jobs out there. Welcome to 2011

          • I can’t agree more. I’d like to think I am at least above average intelligence, and I can’t even count on one hand the amount of awful jobs I have had. That’s to say, I have literal scars and many tales to prove it. I’ve lived it.

            Bossy Loader at Land O’ Lakes, working in Hides at a stockyard, Pumping manure into semis out of a huge pit, Plastics extrusion, CNC operator, retail/sales, been there. From my experience, most companies use the 1950’s model, and treat people like a resource.

          • Ted Heistman | Jul 18, 2013 at 9:13 pm |

            See this is a very broooooooaaaad experience. Intelligent, hard working people having shit jobs, getting treated shitty and not paid well and not able to get ahead. There is a lot of personal shamed involved very often, but actually its a huge systemic problem.

          • From my perspective, the two easiest outs are either getting a Union job, or illegal activity (growing/dealing drugs, organized crime, etc). Both have their risks. The first is a risk to health. Due to access to chemicals, heavy machinery, random tools, and wear and tear on the body.

            The second has a risk of being arrested with the byproduct of jail/prison time. With a minor risk of people robbing and killing you.

            The third option is more tedious, and maybe at one time actually a good bet of providing liveable means. Which is going to college/trade school. It appears these days the opportunities are waning on that front, plus the upfront and after charges for being trained as a parrot seem like an ever growing waste of time.

            It’s pretty sad when the “good” choice appears like less of a wise survival choice.

          • Ted – I understand what you’re saying. A lot of good, smart people are not in a position to reject a paycheck. Although according to the video you posted, they would be better off entirely on public assistance than working for walmart.

          • Ted Heistman | Jul 19, 2013 at 7:12 am |

            um…actually I think he is saying the opposite. Eventually all these programs will have to be cut. The country is broke and jobs in the private sector aren’t being created. I think people need to get back to basics. Grow food and have little cottage industries. Create a new economy based on reality.

            But right now a lot of people are working often two crap jobs and barely making it and feeling a real strong sense of personal failure. I am talking college graduates in many cases. working 60 hours a week for $10.00 an hour doesn’t get anyone anywhere. Then they eat junk food and fast food from being too tired to cook.

          • I get that. I was referencing one particular slide @ 11:30 min.

          • Ted Heistman | Jul 19, 2013 at 9:30 am |

            Well households who make under $24,000 are better off on public assistance. But its not an easy life either way. Lots of people working lots of hours and relying on foodbanks because they don’t qualify for foodstamps.

          • the 2011 census reports 25% of US households make $25,000 or less. So roughly 1/4 of the country would be the same or better off relying completely on public assistance. I expect that number grows when adding in the extra income needed in states with income tax.

          • Ted Heistman | Jul 19, 2013 at 11:18 am |

            In terms of income yes. In terms of having a sense of personal autonomy, independence and self esteem no. So yeah, at least 25% of the country is in a very precarious situation, but then again there are people approaching the middle class, who are very overextended also. A two parent home, with both parents working more than 40 hours a week struggling with debt, medical bills, kids moving back home and aging parents.

            Its a crisis situation.

  4. Ted Heistman | Jul 18, 2013 at 4:51 pm |

    I guess at this point I would like to see them go bankrupt and the Walton’s end up broke.

  5. melvin lafleur | Jul 18, 2013 at 7:15 pm |

    fobbing off low paid workers onto food stamps and medicaid at taxpayer expense is a piss poor business model. my local union grocery store charges about 30% more for much better food than i could get at walmart so no more walmart for me. believe it or not i can still easily stay within my $200/month food budget and feel much better about myself and my community.

  6. I worked for Walton industries once. This was over ten years ago, and even then I felt like a number instead of a person. I can’t imagine how worse it has gotten.

  7. BuzzCoastin | Jul 18, 2013 at 9:18 pm |

    thank you Walmart
    for making it readily apparent
    that working for a living is a fool’s game
    and gaming the fool is what the “good” Walmarts are doing

    • This has fallen off a truck *wink wink nudge nudge*

      • BuzzCoastin | Jul 18, 2013 at 10:21 pm |

        all of consumerism has fallen off a truck
        Walmart is just a cliche of the archetype
        and all archetypes rise & fall
        the way up is the way down

  8. There are examples dating back to the dawn of the industrial age where employers made the choice to fully vest laborers in the business, treat them well and pay them solid wages plus benefits…and they’ve classically worked out incredibly well. Obviously theres one hitch to an otherwise profitable and ethical system of management: it defies every fiber of a greedy person’s instinctive beliefs. It ‘feels’ like giving away money to the hired help who are just supposed to be cogs in a money making machine. It’s antithetical to the logical belief that every penny you don’t give the workers is additional profit…as opposed to the truth…investment in productivity and growth reaps commensurate rewards.

    Interestingly, even despite America’s current trend toward grinding out every erg of sweat from labor with minimal rewards, we’re still one of the most productive countries in the world…with per person/per hour output beating or matching most of the countries we shipped most of jobs to (especially when finished quality is accounted for)…so the claim that American labor isn’t worth it or is overpaid and lazy…is a measurable falsehood. The problem is that we’ve been ground down to a level where more and more Americans are realizing that their output is worth far more than their being paid…and that there is no reward for hard labor. Minimum pay gets minimum quality…just like in all the countries that make use of near slave serf labor to pump out crappy products. We are actually breeding an environment of zero vestment and poor quality…and it’ll take decades to undo.

  9. DrDavidKelly | Jul 19, 2013 at 4:24 am |

    I saw there was 39 comments and decided to have a read but it turns out it was just a Ted and echar love in …

  10. DeepCough | Jul 19, 2013 at 12:18 pm |

    Businesses like Wal-Mart like to run on Supply-Side Economics, because they hate having to meet what they call “workers’ demands,” which everyone else likes to call “basic worker incentives,” like pay.

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