John Staser: Think twice about the price of shopping at Costco, Walmart

By JOHN STASERSeptember 29, 2013 

As I read Julia O'Malley's comments on Costco (Sept. 22), I got a sick feeling in my stomach. There was a certain fondness for the big box store that clearly came through. You see, I'm a local retailer facing tough competition from national chains, and that competition is about to get much worse.

There are a lot of reasons to shop at Costco; Julia does a great job of telling us why we like it. I have to admit even I used to shop there. We all like cheap prices, we like name brands at cheap prices and we really like Kirkland copies of name brands at even cheaper prices. But is cheaper always better? Here are a few reasons why you might think twice about how and where you spend your money.

First, local businesses tend to spend their dollars supporting other local businesses. This makes the local economy stronger and healthier. Supporting your neighbors and helping them make a living is a good thing for our community. Our business buys our office supplies at Arctic Office Supply, I go skiing with my accountant, I played high school football at West High, (a long long time ago) with my book keeper, I have my advertising created locally, I buy my insurance from a local agent, my lawyer is local, I bank at First National Bank and I buy from my local distributor, V.F. Grace.

The big difference between my business and any national chain is that they buy most of these services and supplies through their national headquarters. I'm helping Alaskans and they help folks in Kirkland, Wash., or Arkansas or Nebraska. Every dollar spent at these national chains is transferred outside the next day. A recent study published in Outdoor Magazine concluded that local business re-circulates three times more money locally than chain stores. This translates into more jobs for residents, more tax revenue for local governments, better support for local non-profits and more local investment.

Second, we all pay a hidden cost for cheaper products. Big box stores like Wal-Mart have forced most of our manufacturing to China, India and Bangladesh in search of cheaper labor and manufacturing costs. That hasn't worked too well for our national economy. We've lost a lot of good paying jobs here. It's cheaper to manufacture in China because they pay their people less, they have no environmental regulations and no safety regulations. While everything is indeed cheaper, the costs to us come in the form of supporting low wages and child labor worldwide, supporting unsafe working conditions, as in the recent factory collapse in Bangladesh, and supporting pollution in China so horrific you can barely breathe. Small local businesses didn't push manufacturing out of America; Wal-Mart did in its quest to find, "always low prices, always."

Lastly, Costco and other national chains prefer to sell their own brands over the name brands. The Kirkland, REI and Cabelas brands are just some examples. They make a much higher margin on these products than the ones they have to buy from other manufacturers.

The question is, have they done any product research or product development? Have they come up with any innovative ideas? In many cases they have stolen the styles and innovations developed by other manufacturers like Patagonia, The North Face or Browning. Imagine how you would feel if Costco did this to your invention, product or artwork. Something you worked hard to create. Making money on cheap copies of other's designs and ideas just goes against what I think is fair.

Costco also goes a step further than most national chains. They actually seek out quality brands that refuse to sell to them, buy the brands under false pretense and sell the brands well below the suggested retail price. This is how they obtain those North Face fleece jackets Julia was referring to. This practice devalues the brand, hurts the manufacturer, stifles innovation and destroys small businesses trying to play by the rules. It may be legal, but it's not right.

National chains are here to stay; they are brutally efficient cash generating machines, sucking local businesses dry. Although I know Julia shops locally too, I invite her and all Alaskans to spend less at Costco and more locally. It's time to reconsider our values; cheaper isn't always better.

John Staser and his wife Julie own Mountain View Sports and Adventure Apparel. He also is a member of the Anchorage Daily News guest editorial board.

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