Retailers: Store labor is an investment, not an expense
Retailers: Store labor is an investment, not an expense
Insight

Retailers: Store labor is an investment, not an expense

Retailers need to look at store labor as an investment—not an expense

Rising wages and low unemployment are pushing retailers’ labor costs higher, and retail executives are looking at store staff cuts to keep those costs under control. Some cuts may be unavoidable. But retailers making across-the-board cuts run the risk of leaving too few staff on the floor—with unintended and highly counterproductive consequences.

Why? Because in-store shoppers like talking to real people—and interactions with store staff drive sales. We recently surveyed 1,000 U.S. consumers to gain insights into the impact of in-person customer engagement. We discovered that interacting with helpful store staff is a critical part of the in-store shopping experience. Two-thirds of shoppers would prefer to interact with a store associate rather than a kiosk or other technology. And 80 percent actually like being approached by store staff. This interaction plays a pivotal role in making the sale, too:

  • 87 percent of respondents said availability and expertise of store staff was important to their decision to shop in-store
  • 79 percent of shoppers who made a purchase and interacted with staff said that interaction was important to their purchase decision.
  • 42 percent of shoppers who didn’t make a purchase said a store associate could have persuaded them to buy an item.

Retailers know that good staff drive sales, and they appreciate the potential benefit of having more staff available to serve shoppers. Yet nearly 90 percent have responded to rising labor costs by cutting hours—and using more part-time staff, eliminating managers and reducing non-customer facing activities to minimize the impact on the floor.

We believe there’s a better way to tackle rising retail labor costs while delivering the interaction consumers value—by optimizing the store labor model. Based on our own experience in the market and our discussions with U.S. retail leaders, we identified a number of short-term tactics that can be implemented quickly:

  • Optimize the part-time/full-time mix. Retailers need to strike the right balance between flexible, lower-cost part-time staff and more highly skilled full-time staff who are pivotal in customer-facing roles.
  • Use traffic and sales data to schedule. When we looked at customer-facing time and sales at one large chain, we found that there’s an optimal amount of customer interaction time. Store executives can use their own data to adjust staff schedules and assignments to hit the sweet spot.
  • Optimize store operation hours. Traffic and sales data can be used to adjust and tailor store hours to suit seasonal and geographic variations.
  • Identify and reduce low-value tasks. Store associates spend a lot of time on non-customer-facing activities like shelving and stickering. Eliminating or reducing these tasks can boost the customer-facing time that drives sales.
  • Align span of control. Identifying redundancies in levels of management and establishing a consistent span of control can be a big-impact easy win.

These short-term actions can lead to quick savings that can, in turn, pave the way for more significant, longer-term strategic and operational changes—from optimizing inventory levels and product deliveries to developing staffing matrices for different store tiers. To learn more about how retailers can manage labor costs without risking the customer contact that brings shoppers to store, read our report, Store labor is an investment, not an expense.