Costco, a company renowned for its customer-first approach and the one-of-a-kind shopping experience, is now in the throes of a major labor challenge that threatens to bring the company to its knees across the nation.
The Warehouse Club’s reputation for low prices, exciting inventory, and flexible return policies have helped it maintain a loyal membership base.
However, a conflict with unionized drivers threatens to undermine this standing and potentially cause supply chain issues.
Union Drivers Accuse Costco of Wage Violations
According to TheStreet, Teamsters Local 174, representing about 150 Costco fleet drivers in Sumner, Washington, has filed complaints alleging that Costco has withheld pay following a recent wage agreement.
The union claims drivers have not received promised wage increases, pensions, and other benefits. Rick Hicks, Local 174 Secretary-Treasurer, called the situation “wage theft” and vowed to continue fighting until workers are fully compensated.
Costco’s Business Model Relies on Customer and Employee Satisfaction
Costco’s business model relies heavily on membership fees, which require delivering ongoing value to members. Members pay annual fees to access low prices and a constantly changing product selection, which is likened to a “treasure hunt.”
The company has one of retail’s most generous return policies, accepting returns several months, or even years, after the purchase.
This consumer-friendly approach is balanced by Costco’s reputation for treating its employees well, who make an average of over $30 per hour and comprehensive benefits including healthcare, dental, and vision insurance.
Union Authorization for Strike Raises Stakes
More than 18,000 unionized Costco workers across the nation voted overwhelmingly at 85% to authorize a strike if a fair contract is not reached by January 31, 2025.
The Teamsters union critisized Costco’s management for refusing to negotiate a contract that would reflect the company’s record-breaking profits, which have grown 135% since 2018 to $7.4 billion. The strike authorization signals serious labor unrest that could impact dozens of stores across six states.
Implications for Costco’s Supply Chain and Customers
The unionized drivers play a critical role in Costco’s extensive logistics network, ensuring warehouses are stocked with popular products.
A strike or prolonged wage dispute risks inventory shortages across the country, frustrating its members and disrupting the shopping experience.
There could be no worse timing as the tariff uncertainty has already shaken fragile supply chains, compounding the risk to Costco’s operations and reputation.
Costco’s Reputation Is On The Line
Costco has been widely viewed as a top employer among retailers, offering competitive wages and benefits that help reduce turnover. Comparably rates Costco highly for employee retention and satisfaction.
However, the current labor dispute challenges this image. Workers argue that rising inflation has eroded their real wages, and the company’s failure to meet union demands threatens to damage its standing among employees and customers alike.
Recent Membership Fee Increase and Wage Hikes
Costco increased its membership fees in September 2024 for the first time in seven years, increasing the basic fee from $60 to $65, and from $120 to $130 for the executive fee.
The company also increased wages for both managerial and hourly employees. Despite these increases, unionized workers feel the compensation does not adequately reflect Costco’s financial success or the rising cost of living.
Expert Insight on Labor Relation at Costco
Tom Erickson, Director of the Teamster Warehouse Division, commented on the dispute, “While Costco claims to treat workers better than the competition, it’s failing to live up to that reputation.”
He emphasized that the union’s strike authorization is a message to Costco management to deliver a fair contract or face significant operation disruptions.
Recent Developments: Strike Averted Temporarily
In early 2025, a last-minute tentative agreement between Costco and the Teamsters union temporarily averted a strike that would have affected 18,000 union employees in 56 stores.
This agreement bought time for negotiations but did not fully resolve underlying tensions. The potential for future labor actions remains if a lasting contract is not secured.
A Critical Juncture for Costco
Costco stands at a critical juncture where its commitment to customers and employees is being tested. The labor dispute highlights the challenges of balancing competitive pricing, employee satisfaction, and operational efficiency.
How Costco resolves this conflict will significantly influence it reputation, supply stability, and member loyalty moving forward.