There is undeniable tension between employees who fear AI will take their jobs and CEOs who are wildly optimistic that AI will change their businesses for good. As executives name AI as one of many reasons for mass layoffs, Costco’s CEO Ron Vachris views AI as a supplement to human value.
Two weeks ago, Vachris spoke at the Economic Club of Chicago about how AI is—and isn’t—changing Costco’s workforce of 341,000.
Costco has used AI in many parts of the business, and has seen an increase in sales in some of its departments, like in the pharmacy sector.
“AI has been extremely good for our company in an assistive nature,” Vachris said. “What we found is, it has worked very well, complementing our employees and the systems that we put in place in the pharmacy, in our gas stations, and in the accounting department that we have. And also in some of our IT. It was writing some code.”
In Vachris’s eyes, the tech serves to empower Costco employees rather than replace them.
“Everyone that we put in place has enhanced the business,” Vachris said. “We’ve not displaced people because now the business is growing at a faster rate. But those employees that were doing those tasks before have now elevated up to more of a forward-thinking role.”
Some of the decision-making at Costco will never be outsourced to artificial intelligence, Vachris added.
“I don’t see AI making choices on items for Costco,” he said. “I don’t know that we’ll ever take that out of the hands of a skilled buyer. AI won’t be doing evaluations with our employees. But there is a great place for developing AI systems, and it’s going to make us a better company.”
Vachris started as a forklift driver at the company in the 1980s and became its CEO in January 2024, now overseeing the retail giant with more than $275 billion in annual revenue. When it comes to his leadership style, he said he abides by the rule of simply being himself.
“I’ve learned so much from multiple people in the organization. It really comes down to ‘you got to be you,’ right?” Vachris said. “I’m gonna be me with the attributes of all the things that I’ve learned over the years, and the strengths and the responsibility of taking care of our company and continuing to grow it and taking care of our employees. When you try to be somebody else, in my opinion, people see right through that.”
His paradigm seems to be paying off: As of last year, Costco had 81 million paying members, and Vachris said that the retailer is running a 90% renewal rate. The company has a market capitalization of more than $440 billion, with shares up 17% this year.
Costco’s culture also apparently works for employees, considering that 55% of them have been with the company for five years or more.
“Our number one competitive advantage is our people,” Vachris said. “It’s the best competitive advantage we have over anybody else in the industry.”
While Costco isn’t outright resisting artificial intelligence, it seems like Vachris has other priorities to keep the company at the top of the game—like $1.50 hot dogs . . . sold by human employees, of course.