WinCo does manage to pay more for labor while costing less to customers. How do they do it?
According to the Times, part of their success is due to specialization. WinCo specializes in food and carries only a few products in each category. It also seems to cherry pick the best locations, whereas WalMart is everywhere. Also, WinCo doesn’t do credit cards (they do debit cards, which I assume are cheaper to process) and you bag your own groceries.
So they’re a much more focused and specialized retailer, and can therefore optimize better.
h/t Tracy Cleeton for the Times article.