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.

  • ebrake74

    Sams Club may have bigger purchasing power but it has a problem with purchasing too much. There stores are messy and cluttered, micro-managed to the extreme and make for a miserable shopping experience. Store are consistently understaffed and turn-over seems to be very high which makes for a miserable staff.

  • I’d like to find out which one is best??

  • Jacob

    I disagree with your notion that a business with principles will struggle in our economy. The way I see it, any good company that takes care of it’s employees, will take care of it’s customers, who will take care of the investors. Thanks for the analyst review, but let’s face it, people make the difference. And people with good pay and benefits will devote more of themselves to the company they work for everytime.

  • Robert K.

    This attitude of maximizing the profit to the shareholders to the detriment of everything else is one of the major factors that has gotten us to the point in our economy where we’re at now. That is the attitude that most of the market analysts on “Wall Street” have that has driven investors into panics and away from good “traditional” companies, and have driven those same companies into gutting their “traditional” company doctrines and changing into amoral throat-cutting monsters, that no longer feel any loyalty to their employees. Only driven to rape the market and employees to return profits to their shareholders, and nothing else. This is our current economic market place, thanks to the “new” Wall Street philosophy that has been sold to business and investors, all too willing to buy into anything for a buck.