Shop the Vote
Wal-Mart = Bush. Costco = Kerry. Costco's Winning.
This is the era of hyper-polarization. Or so David Brooks tells us. We've got red-state and blue-state news channels, films, books, even musicians. Now we've also got red-state, blue-state discount retailers.
On the left: Costco Wholesale Corp. Last week, Jeffrey Brotman and James Sinegal, chairman and chief executive office of Costco, respectively, joined the list of executives who endorsed John Kerry for president. The company is based in Washington (a blue state in the past four elections, and one that Kerry leads, by a 53-45 margin according to the Aug. 2 Zogby poll), and a list of its locations bears some resemblance to the Kerry-Edwards campaign: strong on the affluent coasts and virtually nonexistent in the comparatively poor Great Plains and in the Old Confederacy. (Here are some basics on Costco.)
Like today's Democratic Party, Costco favors highly trafficked urban and edge-city locations—it has three stores in New York City. And it caters to a decidedly upscale crowd. As John Helyar reported in this excellent Fortune profile, the average salary of a Costco member is $95,333. The company's merchandise mix reflects the fact that its customers shop at discounters by choice, not by necessity. They're New Luxury suckers who like to save on staples, more Jean Chardonnay than Joe Six-Pack. As Helyar notes: "Costco is the U.S.'s biggest seller of fine wines ($600 million a year)." (Needless to say, "Moneybox" has been a member since 2000.)
Costco also has the sort of labor policy that would bring a smile to Barbara Ehrenreich's face. Pay starts at $10 an hour. About one in six employees is represented by a union, and workers receive nice health benefits. Sinegal has a non-zero-sum view of employee relations. Give people good jobs at good wages, and they'll be more likely to work harder, less likely to leave, and less likely to steal. As Helyar reported, Costco's turnover "is a third of the retail industry average of 64%," and "shrinkage"—the amount of inventory lost to theft—"is about 13% of the industry norm."
On the right: Wal-Mart Stores, Inc. Founded in Arkansas (a blue-turned-red state), it grew by spreading into the adjacent South and Great Plains. Like today's Republican Party, it focuses intensely on rural areas and generally avoids cities. (Republican conventioneers won't be able to shop at a Wal-Mart when they visit New York City.) As this Bloomberg story notes, "Sixty-seven percent of Wal-Mart's stores are in the 30 states that voted for Bush and Cheney in 2000."
The company's labor policies are state-of-the-art, for the 1890s. It has been investigated for hiring contractors who allegedly hired illegal aliens to clean Wal-Mart stores and for locking them inside overnight. (One wonders if the Wal-Mart employees who in April were bused in to hear Vice President Dick Cheney sing the company's praises at Wal-Mart's headquarters were similarly confined.) In June, a federal judge certified a class-action lawsuit filed on behalf of female Wal-Mart employees who claimed discrimination. The average wage at Wal-Mart, which has no unions and bitterly opposes raising the minimum wage, is lower than Costco's lowest wage. Turnover at Wal-Mart, according to the Economist, is 44 percent, meaning it "has to hire an astonishing 600,000 people every year simply to stay at its current size."
So far this campaign cycle, Costco CEO James Sinegal has made campaign donations of $93,500 according to OpenSecrets.org—all of it to Democratic candidates and entities. Brotman has donated $38,250 in this cycle, again all to Democrats. In addition, Brotman and Sinegal have also given $95,000 apiece to the Joint Victory Campaign, one of the most influential of the anti-Bush527 committees, independent entities that can accept unlimited donations from individuals. Sol Price, the founder of Price Club, which merged with Costco in 1993, has given more than $44,000 to Democratic campaign causes this cycle.
Wal-Mart, by contrast, focuses its fundraising largely on Republicans. Jay Allen, Wal-Mart's senior vice president for corporate affairs, is a Bush Pioneer, meaning he's raised at least $100,000. Wal-Mart CEO Leo Scott has donated to the president's re-election campaign. Through July 6, according to Sheila Krumholz, research director at the Center for Responsive Politics, Wal-Mart—the company, its PAC, and individuals employed by it—have made political donations of $1.658 million. Of that, $1.34 million, or 81 percent, went to Republicans. While many corporate PACs hedge their bets and give to both parties in rough proportion to their control of Congress, "Wal-Mart stores appears to be a more ideologically aligned company," said Krumholz.
Consumers vote by shopping. And so far this year, they're voting more for Costco than Wal-Mart, yet another illustration of the Two Americas shopping theme. Costco's customers plainly have cash to spend. For the four weeks ended Aug. 1, Costco's same-store U.S. sales rose 9 percent; in the 48 weeks ended Aug. 1, they were up an impressive 10 percent. At Wal-Mart, the registers haven't been ringing quite so loudly. In its most recent four-week sales period, same-store sales rose a meager 2.4 percent. For August, Wal-Mart sees same-store growth of between 2 percent to 4 percent—about the same growth rate as the economy, if not slower.
So far this year, the Democratic-leaning chain has also been winning in the forum in which investors vote on company's future prospects. Over the long-term, Wal-Mart has done far better than Costco. But look at charts showing the relative two-year and one-year performance (fittingly, Costco is the blue line and Wal-Mart the red), and the Democratic discounter has been kicking the tar out of the Republican discounter.
Daniel Gross is the Moneybox columnist for Slate and the business columnist for Newsweek. You can e-mail him at firstname.lastname@example.org and follow him on Twitter. His latest book, Dumb Money: How Our Greatest Financial Minds Bankrupted the Nation, has just been published in paperback.
Photograph of Costco by Mark Peterson/Corbis. Photographs on the Slate home page of: Wal-mart by Jeff Mitchell/Reuters; President Bush by Mannie Garcia/Reuters; and Sen. John Kerry by Mike Segar/Reuters.