Costco vs. Sam’s Club

This should prove to be a very good business battle. Sam's Club has better purchasing power, but Costco has been beating them for awhile. I've never been to a Costco, so I can't really say which store I like better. I have read before that Costco catches a lot of flack from shareholders for refusing to price anything more than 14% over what they paid for it.

Costco is known for putting employee and customer interests first. It picks up much of the cost for employee health plans. And to the benefit of customers, it doesn't sell goods at more than 14% above the price it paid for them. While such efforts are popular, shareholders end up paying a price, says Tryka, in the form of lower profit margins. "Management is focused on consumers and employees to the detriment of shareholders. To me, why would I want to buy a stock like that?"

These business practices, while admirable, may limit Costco's ability to raise new capital if needed to compete with Sam's Club. Thus, while some may praise Costco's choices, ultimately if you don't put long-term shareholder value first, you may be put out of business by the competition, which means your admirable business practices will cease to exist as well. Costco does have one advantage though, they will take care of rebates in the store. They refund your money on the spot, and compile and send in the rebates themselves. That can save consumers many headaches. I personally hope Costco succeeds, but markets are amoral, and don't care for admirable business ideas unless they can turn a profit.

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