Costco's corporate culture

In Costco, this is not just a problem. This is the problem. Many companies are boasting about their own culture, but few companies are so proud and dependent on corporate culture as Costco. Simon guttmann, a retail analyst at Morgan Stanley, called it "super culture". He described it as, "If we continue to serve our customers and satisfy them, these customers will continue to come back."

Costco is a retail giant. Its global sales are second only to Wal-Mart and Amazon, which just took the second place. It should be pointed out that Wal-Mart has1.15.28 million stores, while Costco has only 7 15 stores. Costco is the world's largest buyer of selected beef, organic food, roast chicken and wine. Its nut sales even lag far behind the famous nut brand Planters. From packaged goods to beverages to clothing, its own brand Cauquelin sells almost all goods, and its sales revenue exceeds that of Coca-Cola Company.

"People will compete to work for Costco." Craig Wilson, vice president of quality assurance and food safety business who worked for Costco at 18, proudly said. Once you join, you will be loyal to it. For employees who have worked 1 year or more, the employee retention rate of Costco is as high as 94%. Paul latham, senior vice president in charge of membership, marketing and Costco services, said, "Even if you throw me a bag of money, you can't tempt me to leave this company." He worked in Costco for 37 years. "I like it here." If no one leaves, few people will be fired. When the recession and layoffs hit, Costco's think tank didn't let anyone leave. Jerinik said, "We didn't even think about it." Instead, the company gave its employees a raise to help them tide over the difficulties.

Claudine adamo is one of these employees. She represents the future of Costco. When adamo, 46, graduated from Western Washington University majoring in financial marketing, she applied to join Costco because her two sisters worked in the accounting department of the company. Adamo had hoped to get a job at the company headquarters, but she was told that in Costco, everyone started with a "warehouse" (which the company called a spacious storefront). In this way, her initial dream was shattered. Adamo suppressed his pride and went to Kauquelin. Her job is to greet members and check receipts. "My friends think I'm crazy." She said.

Today, 25 years later, she is being recommended as a candidate for the next executive team, which will replace Jerinik and his team one day in the future. At this moment, she and other senior vice presidents have begun to look for their successors. In many ways, adamo's story is a classic portrayal of Costco leadership.

There is also the way Costco treats employees. The retail giant is willing to pay high salaries for its employees (the average hourly wage is $22, much higher than Wal-Mart's $65,438 +03.38) and provide generous benefits-even part-time employees can enjoy adequate health and dental insurance. After one year's employment, new employees' retirement savings accounts can be rewarded with stock options. Traditional benefits such as free vacation and family leave are self-evident. Zenep Thorne, an associate professor at the Si Long School of Management at the Massachusetts Institute of Technology, said that Costco employees have also been given greater responsibilities, thus creating a happy and enterprising workforce. "They are constantly innovating and improving, which is why Costco can pay them high salaries." Thorne said.

Adamo has spent his whole career in this company. After working in the "warehouse" for a year, she became an expert in inventory control, responsible for distributing candy to shops in the northwest. Her promotion journey continues: candy purchasing assistant, buyer of the company's mail-order business (which later evolved into Costco.com), and computer buyer of all stores. Later, she also opened a regional office in Southern California as a commodity manager. Adamo finally returned to Seattle and became the vice president of family affairs, in charge of furniture, small appliances and household items. She is now the vice president of consumer electronics, jewelry and office supplies business.

It was a long journey, but it was this journey that convinced her that Costco would not succumb to the temptation of the next fashion concept. "In Costco, you really start from the bottom, and then grow up in this atmosphere through tempering in various positions, learning by doing."

Almost every executive has experienced a similar growth process, including CEO Jerry Nick. "I know what it's like to collect and organize shopping carts." He said. "I know how to clean the bathroom. I can go into the bathroom and tell the staff that he forgot to clean the tile near the urinal. I know what it's like to harvest agricultural products or grind raw beef. So when you talk to employees, you are not a noble who rides a white horse and doesn't eat human fireworks. They know that you have been here and done this. " Richard Galanti, a longtime CFO, described the corporate culture as "no idiots".

Everyone in Costco will tell you that the culture of this company comes directly from Jim Singel, a short and amiable old man with a moustache. 80-year-old Sinegar is the co-founder of Costco and has served as CEO for a long time (1983 to 20 12). Today, you can still see him at the headquarters in Isaqua every day. In turn, Sinnegar attributed his business philosophy to Saul Price. 1954, the grumpy lawyer founded FedMart, the originator of warehouse stores in San Diego, and pursued the principle of low-cost mass sales, mainly serving small businesses. When Sinnegar first worked in FedMart, he was still a college student who was only 18 years old. He soon became a believer in price, especially the golden rule he realized after witnessing people asking exorbitant prices during the Great Depression: always do the right thing.

1983, Jeffrey Bratman, a Seattle lawyer, took the initiative to contact Synica and suggested that they set up their own warehouse store together. In their view, it is not only a company, but also a mission; It is not only a business, but also a way of doing business. "Do the right thing" was and still is the slogan of the company. This may sound old-fashioned, like an empty slogan, but Costco employees are really trying to practice it. (Adamo says she hears this sentence every day. )

This means never cheating suppliers, customers or employees. It means facing up to mistakes and actively correcting them, rather than being forced to do so or making excuses. (When Costco found that a shirt made of 100% silk was not real silk, they contacted every buyer and refunded the price. This even means sticking to the unconditional return policy, even though they know it will be abused by some customers. "I used to think I was excellent, honest and reputable, and I think so now. But when you meet Jim, you will say, "Wow!" "Chief financial officer Galanti said. As Sinega said, "Culture is not the most important thing. This is the only thing that matters. "

Although this moral law is particularly strict, Sinega's management style is by no means so. He created an informal environment without any compulsion. In this atmosphere, no one is afraid of making mistakes, and no one plays tricks to make profits. In Costco, egalitarianism is as ubiquitous as the air: whether it is Sinnegar or Jelinik now, the salary of CEO of Costco is far lower than that of most companies at the same level. (Jerry Nick says, "The money I earn is good enough." His basic salary is less than 700,000 dollars. Even parking spaces are allocated according to seniority, not location.

Inep Thorne said that Costco "focuses on creating value for customers" and its operating system is dedicated to benefiting customers, not investors. "Traditional retailers will say,' I bought this product for $29 and I want to sell it for $35.' "Sinnega said.

"But we will say,' I spent 90 dollars on this product, and I want to reduce the price and sell it at 18 or 17 dollars.' This has become the way we do business. You must constantly think about how to bring goods and services to the market at lower prices. "

Of course, people appreciate the high salaries of Costco employees. "But if we raise the price of goods a little, I don't think they will pay attention to it." He joked.

Costco is a company that pursues high efficiency. For example, its basic expenses (including sales expenses, general expenses and management expenses) only account for 10% of the total revenue, while Wal-Mart accounts for about 20%. The facts reflecting Costco's efficiency include: no advertising; Its choice of goods is limited-Costco has only 3,700 kinds of goods, far lower than Wal-Mart and Amazon, and their categories are 1.4 million and 500 million respectively. This enables Costco to bargain with suppliers. Galanti said that Costco's distribution system can fill 95% of its freight capacity, which is an unheard of figure.

Costco had to keep everything simple, because Bratman and Sinnegar had already made a rule: the price increase of any brand goods should not exceed14%; The retail price of its own brand Cauquelin shall not exceed 15% of its cost. This is an inviolable red line, which is Costco's value proposition. The low price is offset to some extent by the annual membership fee of $55, and members can enjoy the privilege of shopping there. Membership fee income accounts for 3% of Costco's total profit. As the company's calculation results show, in view of the extremely low profit margin of gasoline and ground beef, the average price increase of Costco is 1 1%, which is far lower than that of Wal-Mart (24%), ordinary supermarkets (30%), The Home Depot and Lloyd's (35%).

Costco can't tolerate that the price of any store is lower than its own. Nancy Grice, the company's vice president in charge of food and groceries, said that "if we find that the price of any store is lower than ours", Costco will reduce the price before sunset. However, Costco will never do business at a loss.

Sinnegar also has an inviolable value proposition: low price does not mean low quality, because he knows that if so, Costco will lose customers. "Quality, quality, quality." Doug Shute, chief operating officer of Costco, said. "Our biggest challenge is to ensure that the quality of goods is as good as what we advertised." Costco has a strict quality assurance system. The company tested everything from the size of cashews to the number of peels of canned peaches. 1993, after the E.coli outbreak in Jack-in-Box fast food restaurant, Costco was particularly worried about the quality of ground beef and finally decided to build its own beef processing factory. This factory tests beef every 15 minutes. Now, it has even started a cattle-raising pilot project in Nebraska.

Costco's profit margin is only 2%. This insignificant figure once made Wall Street complain repeatedly. Needless to say, most retailers are trying to expand their profit margins. "Our culture is counterintuitive." Richard Leibenson, who jumped from Price Club to Costco and is now a director of the company, said this. "Pay employees the highest possible salary and the best benefits, while adhering to the principle of low profit margin and selling goods at the lowest possible price." But this is because Sinnegar always feels that if you satisfy customers and employees, you will eventually satisfy investors.

Today, Wall Street is almost as obsessed with this retail giant as 865,438+0 million Costco members. Michael Rather, a retail analyst at UBS Group AG Group AG, said that the company has always adhered to its founding principle: "Provide high-quality products at very value-oriented prices and treat customers and employees fairly." He added that Costco doesn't have to reconsider competing with rabbits such as Amazon. "The Costco model is still as meaningful today as it was 20 years ago. We don't think this will really change. "

Change is usually considered as a business necessity, but in Ithaca, people don't think so. Costco executives occasionally cite Sears, a century-old store, as a warning: If they lose their sense of identity, that is, corporate culture, it will be difficult for once great companies to get rid of the fate of bankruptcy.

Costco doesn't want to make the same mistake again. "This business will continue to develop," Yelinik said. "You need to make a change. But what you can't change is how to treat people, attract people and tolerate people. This cannot be changed. " It is not easy to resist change. When it comes to change, we often talk about e-commerce. Costco has made slow progress in embracing e-commerce. For example, a competitor's Sam member store allows customers to order online and then pick up the goods at the store without leaving the car. Costco does not provide such services except pharmacies. By acquiring e-commerce website Jet.com, Wal-Mart upgraded its online sales library to better cope with Amazon's offensive. But neither Costco nor Wall Street seems to think this acquisition will pose a threat. Costco has a membership fee, and members seem to enjoy shopping in physical stores. In fact, they have increased the number of shopping trips to Costco, from every three times? Once a week, now it is increased to once a week.

In the recent earnings conference call, Galanti, the chief financial officer, elaborated on the e-commerce problem of Costco: "We realize that our website faces some challenges." He told analysts. "In the next few months, the number of clicks required to place an order will be greatly increased. In the next six or eight months, the search function of the website will also be improved. " Galanti added, "Convenience has never been our advantage. Our success is always based on price and value, quality and quantity. We do realize that convenience is also a value. We will greatly improve our work. But this does not mean that we will deliver the goods to you within two hours. "

Nevertheless, if you think Costco should emulate Amazon, think again: As an analyst pointed out to me, Jeff Bezos' Amazon Gold Membership Service is actually emulating Costco's membership model, not Costco's adoption of Amazon's e-commerce model. The analyst even thinks that because Costco has well-trained employees, it may be more suitable for serving customers than e-commerce companies. Even millennials who you might think prefer to shop by mobile phone are becoming loyal fans of Costco. Among Costco customers, millennials are the fastest growing group. Generally speaking, the members of this company are getting younger and younger.

The problem facing Costco is not outside the company, but the millennial generation inside the company. Wall Street is still optimistic about this company, but analysts are a little worried that after this group of old courtiers have left, will Costco still be the good thing we are familiar with? "I think this extraordinary culture can be passed down from generation to generation," said guttmann of Morgan Stanley. "But we don't have many examples because most retailers are relatively young. We have not witnessed the situation that the founder of a retailer is about to leave at the peak of his career. " In Costco, this scene is beginning. "So I am worried about what will happen to Costco after the handover of the scepter."

When he retired, Sinnegar chose then President Jerinik as his successor. Jerinik said that he has now begun to plan his own inheritance plan, although no one thinks that this day will come soon. Costco has a ten-year plan for executive succession, he said. Claudine adamo said that long before he left his post, Sinegar made a plan to invite the rapidly rising executives to "get to know each other", and Yelinik continued this plan.

UBS Group AG's Russell seems relieved. He said, "they have a very strong bench lineup", and in any case, "culture is not attached to one person." However, there is no guarantee that the successor will always refuse the temptation to turn Costco into a cooler, faster and different company. "The following people also understand this culture? Do they come from this culture? Is this the only job they have ever experienced? " Lai Benson, a member of Costco's board of directors, asked. These are all extremely urgent problems.

Adamo's career has given a positive answer to all these questions and injected another shot in the arm. "The ultimate core of this profession is that you should not only do the right thing at work, but also involve all aspects of your life."

This is why Costco may remain a well-known retailer for a long time to come. Decades have passed quickly, and this company has been instilling a business concept, and now it is working harder than ever to adhere to this concept. It may take decades and some unforeseen events to weaken this concept.