Costco's Second-Class Citizens

Megan McArdle is a Bloomberg View columnist. She wrote for the Daily Beast, Newsweek, the Atlantic and the Economist and founded the blog Asymmetrical Information. She is the author of "“The Up Side of Down: Why Failing Well Is the Key to Success.”
Read More.
a | A

Apropos of yesterday's post on Costco, Wal-Mart and Trader Joe's, Ira Stoll passes on the following piece of information, which I hadn't known about:

On two recent visits to a Costco in Dedham, Mass., I found the aisles full of employees wearing badges, offering samples of food, and answering questions about where to find merchandise. They don't work for Costco, but for a company called Club Demonstration Services. (A similar company called Warehouse Demonstration Services handles the Costco work in some other states.) Posts on employment law bulletin boards (here) say things like, "I work for Club Demo Services within Costco. We are titled Sales Advisors and do all the demos in Costco. We are all part time, no benefits, @$11.00 per hour. Our shift is 6 hours - a paid 15 minute break and an unpaid 30 min lunch." The Warehouse Demonstration Services site describes it as "a perfect part-time job."

This article from 2008 tells more about the way that Costco treats these demonstrators who work in its stores as second-class citizens, or at least, with lower compensation than its regular employees, and, in some cases, wages so low that the employees qualify for food stamps.

According to the linked article, these demonstrators make up about 10 percent of Costco's in-store workforce. I had no idea that they didn't work for Costco. It seems that the majority of people who I interact with on a Costco trip actually work for someone else -- captive contractors who exist to provide demonstration staff for Costco stores.

Presumably, it's set up this way because Costco only wants the demo folks on weekends and a few other high-traffic public holiday days. Costco proper offers a weekend wage differential, but according to the California website that ran the original story, the demonstrators don't. Ironically, they'd probably be better off working at Sam's Club, where they'd get some benefits -- and a chance to advance within a big retailer.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Megan McArdle at