Costco Wholesale Corp has made a business out of doing things its own way. It pioneered and perfected the high-low formula, selling bulk toilet paper and $1.50 hot dogs alongside gold bars, diamond rings and more wine from Bordeaux than any other retailer.
It keeps its profit margins low while requiring a membership fee for the privilege of shopping at its no-frill warehouses. It’s a discounter that pays employees some of the highest wages in a retail industry notorious for squeezing its workforce.
Costco has made another bet on zigging while the rest of the sector zags. As retailers like Walmart bow to pressure to reverse their commitments to diversity, equity and inclusion (DEI), Costco has stayed the course.
The company’s board last month recommended that shareholders vote against a proxy proposal from conservative think-tank National Center for Public Policy Research, which would require the company publish a report on ‘risks’ associated with its DEI programmes.
The proxy proposal has little to do with forcing Costco to publish mundane facts and figures; it’s about killing Costco’s DEI efforts. The board put it bluntly: NCPPR’s “broader agenda is not reducing risk… but abolition of diversity initiatives.”
Rather than back away meekly, Costco goes on in its reply to make a strong business case for its DEI efforts. To the retailer, diversity is a critical business imperative, not a PR initiative, something that companies bowing to the anti-woke mob may have forgotten—or perhaps never really understood.
Since Costco’s response got picked up by the media, the blowback from a faction of conservatives has been predictable. There have been calls for a boycott, with right-wing activist Robby Starbuck suggesting on X that consumers spend their money elsewhere.
Starbuck has been on a crusade to wipe DEI out of America Inc through social media boycott threats, a strategy made more effective by an incoming Trump administration likely to go after companies it deems left-leaning.
But it’s apparent that Starbuck doesn’t think Costco will be as easy to turn as some of his past targets. In his X post, he made clear that he wasn’t behind the Costco campaign, saying that he hasn’t yet focused his attention on it because it doesn’t fit with his “meticulously” planned timeline of how and when he goes after companies to maximize impact.
The replies to Starbuck’s post indicate he’s smart to distance himself from the Costco fight if he doesn’t want to tarnish his “100% flip rate.” His post has plenty of cheerleaders, but the responses to the suggestion of a boycott exude more dissent and hesitancy than he’s used to:
“Costco is the best run retail store I shop at. Why would I abandon that for an inferior experience at another store? If their policies start to degrade the shopping experience I will begin considering other options but not a second before then,” said a Starbuck follower.
“I am sure Robby and his Org can have an impact, but the Costco leadership prob feels almost impervious to cancel culture! They are that special,” said another. Who wants to tell them that part of what makes Costco special is its diverse workforce and supplier base?
Costco does a stellar job of making that connection in its proxy, writing, “A diverse group of employees helps bring originality and creativity to our merchandise offerings, promoting the ‘treasure hunt’ that our customers value.” The company also notes that it has an increasingly diverse customer base that wants to see itself reflected in its stores.
This is not just a hypothetical. The week after Walmart walked back some of its DEI initiatives, it launched a holiday ad featuring Nia Long and Larenz Tate, stars of the 1997 romcom Love Jones, that targets African-American shoppers.
Some of the comments on the ad’s YouTube page are brutal, with posters calling out the hypocrisy of trying to capitalize on such consumers even as it retreats on efforts to support its African-American employees.
“Walmart has probably fired everyone who conceptualized this ad by now,” went one comment. “They won’t hire you to work in the store but they will use you in ads,” was another.
Costco is probably more willing to stick up for its policies and values because it has more faith that they work. It’s a beloved brand with a cult following—93% of customers renew their membership.
Walmart, on the other hand, has become the largest retailer in the world because of its ubiquity and low prices, but I’m not sure it can say it dazzles and delights customers the way that Costco can.
The real test comes now, as Costco tries to withstand whatever boycott customers muster. I doubt that we’re going to see more than a handful of shoppers burning their membership cards in the Costco parking lot. ©Bloomberg
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