Sam Club is boosting salaries to match rival Costco's wages.
Walmart's subsidiary, Sam's Club, will bump up its minimum wage from $15 to $16 per hour starting in November. This hike will also impact the salaries of its around 100,000 employees, with increments ranging from 3% to 6% based on their length of service.
Sam's Club levies a $50 membership fee from its customers. To maintain and expand its membership base, Sam's Club feels the necessity to deliver exceptional customer service, which is more crucial in a membership club setting than in open-to-all retail stores. With a workforce of well-compensated staff and financial incentives, Sam's Club anticipates improved customer service. Its main opponent, Costco, dishouts a minimum wage of $19.50 an hour, and to keep pace with Costco and other competitors hiking wages, Sam's Club finds itself compelled to up its pay.
As spoken by Sam's Club CEO Chris Nicholas to CNN, the aim is to generate "good jobs that can transform into excellent careers." Stability is significantly more critical for a membership-based model.
In the retail sector, salaries have seen a climb in recent times, as employers have enhanced pay packages to staff stores and warehouses in a tight labor market. Since April 2020, the average hourly wage for retail workers has escalated around 16% - from $21.18 to $24.48 in August.
The news of Sam's Club's wage enhancement aligns with the trend of corporations voluntarily setting wage standards, according to Daniel Schneider, a sociologist at Harvard University. He is part of The Shift Project, which investigates service industry labor. Companies need to reduce turnover to manageable levels, realizes Schneider.
However, $16 an hour isn't sufficient to cover living expenses in most American locations based on MIT's living wage calculator, which estimates the income needed to cover basic necessities.
Previously, Sam's Club hourly staff members received annual wage increments of 3% until capping out at $36 an hour in some jobs. With the new plan, employees can now earn raises of up to 6% yearly until they hit the maximum wage. After hitting the maximum, they receive a lump-sum supplement of 6% of their annual income.
As pointed out by Schneider, significant guaranteed annual raises linked to tenure would be beneficial for Sam's Club employees. Costco, for instance, is recognized for its superior pay and wage growth for employees who stay with the company for an extended period.
Sam's Club's wage hikes and revised wage structure are parts of the company's efforts to appeal to its workforce. Over the past five years, Sam's Club has jacked up its starting pay from $11 an hour, presented annual stock awards, and rolled out scheduled shifts to offer employees more consistent schedules.
Since the pandemic in 2020, warehouse clubs have witnessed a surge - with Sam's Club, Costco, and BJ's Wholesale Club adding millions of new members. Many buyers view bulk purchasing at warehouse clubs as a smart investment and are willing to shell out for the annual fees.
Sales at Sam's Club stores operating for at least a year have seen a 2.3% increase in the latest fiscal year, and a 14.6% surge the year before.
"Given our tremendous growth," Nicholas said, "we simply require more personnel."
Sam's Club believes that offering competitive wages can help attract and retain talented employees, as reflected in its decision to increase minimum wage to $16 per hour. To remain competitive in the business landscape, particularly with rivals like Costco, Sam's Club must continually evaluate and adjust its compensation packages.
