By Christine Kern, contributing writer
Report demonstrates that retailers can reclaim labor hours by automating cash handling processes.
Competition from Amazon and Walmart is leading many retailers to struggle to find the labor hours to perform tasks like Click and Collect, Buy Online Pickup In Stores (BOPIS) and Ship from Store profitably. According to a new research paper form IHL Group, enterprise retailers can recapture potentially hundreds of labor hours a month by automating some of the cash handling processes that have become inefficient as the number of cash transactions reduces in most store formats.
The free report, Cash Multipliers - How reducing the costs of cash handling can enable retail sales and profit growth, is based on research that was conducted independently by IHL but the research distribution was funded by Fujitsu, Glory, Balance Innovations and APG Cash Drawer so that we do not need to charge customers.
Over $96 billion was spent on cash handling activities in retail in the US and Canada in 2017, and while the number of lanes that accept cash in retail have grown, the actual percentage of cash transactions has actually dropped in recent years.
As the report notes, while the mix of payment methods has shifted in recent years, what has not changed “are the processes related to how cash is accepted, how it’s counted, how it’s audited, how it’s delivered to the bank, and how it is recognized in retailers’ accounts. Quite frankly, most retailers don’t know their true cost of cash because there are so many components to the process and so many different operating units are involved.” The report asserts that the cost of handling cash ranges between 4 and 15 percent for various retail segments, making it a significant portion of the total overhead. By deploying specific technology, retailers can help lower the cost of cash and become more competitive against online retailers like Amazon and Walmart by freeing up labor and providing a superior customer experience with a profitable margin.
- The cost of cash handling can range on average from as low as 4.7 percent of cash to over 15 percent of cash depending on the retail segment.
- A big problem for retailers is that the cost of handling is a very inefficient process that takes away the most valuable employees at retail (store managers) from many other customer facing activities.
- As the percentage of transactions that are cash have dropped in recent years in favor of other payment types, the processes have typically stayed the same. So the already inefficient process has become even more costly.
"Much has been made about the cost of credit and debit transactions," said Greg Buzek, President of IHL Group. "But the real cost of cash ranges from 4.7% percent to over 15 percent for some retail segments. Optimizing these processes through targeted automation can provide hundreds of labor hours per month to stores to improve the overall customer experience."
Calculating the cost of cash is complicated because it involves so many different segments of the retail operation, from functions relating to opening and closing cash drawers, to pickups and change orders, to audits and discrepancies, deposits, bank charges, and even cash shrink. Retailers need to weigh their options carefully before selecting an automated cash-handling solution, as Retail IT Insights reported.
Included in the study are the costs for handling cash, the hidden areas that are often forgotten, where optimization makes the most sense, how to recapture those labor hours for customer facing activities, and a cost of cash calculator so that retailers can run their own calculations.