Unless you’re one of a handful of successful large retailers, most businesses have had a tough go of it in recent years.
Retailers are facing a new array of challenges, many of which have arisen in the past five years.
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Obviously, five years ago, the COVID-19 pandemic began.
Countless restaurants and retailers were forced to shutter overnight, and many didn’t make it out to see the other side.
Those who did live to see the reopening were met with a fiercer environment.
Customers were hesitant to go back to normal and shop in person again, so foot traffic remained reduced in many areas. Interest rates also soared, making debt and expansion more expensive.
And the brick and mortar retailers had the toughest go of things; many customers had learned to shift their shopping habits online, which meant in-person retail operations became pricier — sometimes unnecessarily so.
People shop in a Costco, the mega retailer that has been thriving for the past several years.
Image source: Brooks Kraft LLC/Corbis via Getty Images
Costco defies the odds
Of course, there were exceptions to this rule.
Major retailers like Costco Wholesale (COST) defied the odds and actually experienced outsized growth over the past five years.
In fiscal year 2023, Costco reported over $240 billion in revenue, compared to about $152 billion in 2019.
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Costco has also been on a major expansion tour. It has expanded into new regions like China and Europe and continues to open about 20-30 stores each year.
Costco makes pay announcement and a warning
Costco is regularly hailed as a great place to work, and it recently just got even better.
The warehouse grocer announced it would hike its pay rate after ongoing discussions with employees. It reached an agreement to raise its minimum wage to $20 per hour, putting its average wages at $31 per hour for most workers in North America, which includes U.S. and Canada.
However, CFO Gary Millerchip recently warned that, while the pay hike is good for workers, market conditions aren’t necessarily great for everyday shoppers in the U.S.
Millerchip said shoppers are “being very choiceful where they’re spending their dollars, and we think that’s likely to continue and maybe even become more choiceful as the impact of some return of inflation and the potential impact of tariffs could flow through as well.”
When management uses terms like ‘choiceful’ in retail, they typically mean shoppers are being more selective with when and where they make their purchases, often shoring up budgets and reeling in bigger purchases.
Tariffs could also potentially spell trouble for Costco. They would make importing inventory — anything from fruits and veggies to televisions — more expensive. Tariffs could also affect supply chains and make things costlier for customers, too.
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