Final answer:
Walmart does not pay higher wages compared to Costco because they serve a different customer demographic, employ lower-skilled workers, have a larger number of products, and have smaller profit margins.
Step-by-step explanation:
There are several reasons why Walmart does not pay higher wages compared to Costco:
Walmart serves a different customer demographic: Walmart's low-price strategy targets customers who prioritize affordability over other factors. This allows Walmart to keep prices low, but in order to maintain its low-cost business model, the company needs to control costs, including employee wages.
Walmart employees typically have lower-skilled jobs: Walmart employs a large number of entry-level and low-skilled workers, which generally correspond to lower wages. The job requirements and skill levels of employees at Costco tend to be higher, leading to higher wages.
Walmart has a significantly larger number of SKUs (stock-keeping units): Compared to Costco, Walmart offers a much wider variety of products. This requires more employees to manage inventory and stock shelves, which affects the distribution of wages.
Walmart's profit margins are smaller: Walmart operates on lower profit margins compared to Costco. This means that the company has less financial flexibility to increase wages without negatively impacting its overall profitability.