Costco Wholesale Corp. on Tuesday announced that founder and Chairman Jeff Brotman died early that morning at the age of 74. "The thoughts of Costco’s board, management and employees are with Jeff’s wife and family," the company said in a press release.
Brotman, along with co-founder and former CEO Jim Sinegal, long touted the superior pay, benefits and working conditions that Costco has become known for. It was an employment approach that apparently hasn’t interfered with the warehouse retailer’s ongoing success.
Costco today operates 736 warehouses worldwide. Sinegal told the Seattle Times that Brotman made himself an "expert" at choosing where Costco should open new warehouses. Sinegal also told the newspaper how important Brotman's personality was to their partnership and the company. "You couldn’t not like Jeff," Sinegal told the Times. "He would say things like: 'I’m not going to let you get mad at me.'"
Thanks in large part to Brotman's ethics, Costco retains the gold standard of retail hourly pay and benefits. The retailer consistently reports happy workers, low turnover and financial success, even in a bumpy economy. Despite the challenging retail environment and increasing pressure from Amazon, the retailer shattered expectations in June in its sales report.
Last year Costco joined its rivals, including Walmart and Target, in announcing a hike in its minimum starting hourly pay, boosting wages $1.50 to $13, the first such raise in nine years. That number is well above the federal minimum wage of $7.25 and approaches the highest minimum wages set by some cities in recent years.
But, in fact, Costco's above-average worker compensation is actually part and parcel of its success, many experts say.
Massachusetts Institute of Technology researcher and retail expert Zeynep Ton studied Costco, Trader Joe’s, QuikTrip (a U.S. chain of convenience stores with gas stations) and Mercadona (Spain’s largest supermarket chain) and said the results of those four retail companies defy the traditional argument that retailers have to raise prices — or lose money — in order to pay higher wages.
Rather, they treat the money spent on workers as a strategic investment and design operational systems that enable their workers to be more productive. That allows those retailers to pay better than their competitors while also offering low prices and pleasing shareholders, Ton has said in her reports.
Columbia University business school professor of retail studies Mark Cohen put it more bluntly. "Costco keeps making money because they load those aisles with really high value merchandise and pay their associates a lot of money," Cohen told Retail Dive in 2015. "And Costco’s associates are helpful and informed, as opposed to nasty, hostile or absent."