Solving the Retail Store Staffing Puzzle
Posted: November 25, 2014
Figuring out store traffic and resulting retail store staffing has become a bit of a conundrum for retailers across the globe.
Some retailers still haven’t figured the correlation between appropriate staffing and optimizing sales. An article in the Harvard Business Review (HBR) argues that while labor is often an expense that retailers have the most control over, and can account for 10% of revenues, they still consider labor to be a cost driver rather than a sales driver, and therefore seek to minimize its costs.
The article goes onto say that at some point, increasing staff will result in loss of profitability. The object is to find that happy medium, when responding to short-term slumps, which result in staff not being cut, but the store trying to adjust the staffing level, which maximizes profits on a continual basis. In many instances, that could involve adding workers.
The continuous pattern of underinvesting in store staff is exacerbated by the fact that not only are retail workers paid low wages, and receive little if any benefits, but the training provided is often lacking. The short-term pressures become a pattern that is hard to resist, resulting in understaffed stores with high turnover of low-skilled employees who usually work part-time and have little or no incentive or commitment to their job.
When Harvard Business School worked with now defunct Borders several years ago to determine how their operational performance fared, they discovered a huge discrepancy in performance. The stores all used the same information technology and offered the same employee incentives, but the best performing store’s numbers were 43% higher than their worst performing store. Why? The labor practices in the lowest performing store reflected a field of employees who had less training, greater workloads and a higher turnover.
Stores with too few employees who are at a low skill level, who also lack motivation, will suffer when it comes to operational execution. This is what happened to Home Depot years ago (a store known for its superior customer service), when full-time staff level was cut to make way for part-timers, in an effort to cut costs and boost profits. These measures worked short term, but Home Depot’s competitive edge of great customer service declined, and with it went customer satisfaction. Same-store sales started dropping and even went negative in subsequent years.
Trader Joe’s and Costco are not only held in high esteem by customers, but also by their retail peers. Employees of these retailers enjoy higher pay, more comprehensive training, better benefits, and more-convenient schedules than their counterparts at the competition. Store employees earn about 40% more at Costco than at its largest competitor, Walmart’s Sam’s Club.
At QuikTrip, a chain of 700 convenience stores located in the Midwest and Southern U.S., even part-time employees receive extensive training and cross-training in a variety of areas. During busy times, staff can focus on customer-related tasks; when foot traffic is low, they perform other tasks and can move from one store to another, since all stores have the same design.
As a result of this cross-training, employees have more-predictable schedules and are more productive, plus customers get faster service from more-knowledgeable employees.
The operational principles discussed in the HBR article serve as a valuable guide to retailers:
1. Offer fewer SKUs and promotions in order to reduce complexity.
2. Cross-train workers so that they may perform multiple tasks, instead of reducing the number of employees to coincide with fluctuations in customer traffic.
3. Eliminate waste everywhere except staffing, in order to increase labor productivity.
4. Empower employees, who should be able to make small immediate decisions.
Success means investing in employees, which can enhance customer experience and decrease costs. While competing on the price front, retailers can also keep their customers and their employees happy.TAGS: retail, retail trends, retailers, work in retail, staffing, career,