By Brandon Pemberton, Point B
Over the past 40 years, retailers have been moving from a professional sales force to entry-level sales associates. The impact of that shift is now being felt in store-level economics. This is particularly true with mass market retailers that have joined the ranks of QSR’s and fast casual restaurants employing primarily minimum wage workers.
To the detriment of already shaky retail economics, statutory wage minimums are increasing at various rates across the country. This variation in state and municipal minimum wage rates creates challenges for retailers that operate across multiple states. While the outlook is good for employees, it is grim for employers, as the wage rates are set to increase radically over the next two years. In addition to rising wages, employees are benefiting from a record-low unemployment rate that drives turnover in entry-level roles. Employers can’t keep entry level employees without promoting them, as they are able to earn up by moving to new companies. The cost of this turnover is not easily quantified.
Big Retailers Are Responding And Leaving Their Peers Behind
Some large retailers are getting ahead of labor issues by raising wage rates across the board. They are not letting store-level economics suffer from this decision, but rather cutting hours and services, even at the risk of compromising their customer service. Retailers who don’t do the same or find a better alternative will be under water, risk closure and lose employees.
Getting More With Less
Many retailers believe that increasing wages is the solution to retention, but that is not always the case. Wages must rise, but only enough. While leading retailers are using data and analytics to help identify optimal wage rates across geographies, they must also retool the entire customer experience. Many are baking new optimized employee processes into new experiences that drive customer engagement, increase customer spend and encourage retention.
Retailers must understand that the role of the employee in retail will change. Leaders will factor this into new processes and employee engagement models. This involves weaving technology into the way employees work, often freeing their time to focus more on customer interaction and driving customer experience.
Retailers can execute on these ideas with a three-pronged approach that leverage:
However, knowing what to do and how to do it is not enough. Retail organizations must be prepared to execute on labor-related innovation to deliver the value they originally sought. To get started:
Retailers that can adapt quickly, develop changes to the way their employees work and execute will not only improve their store-level economics, they also will deliver better experiences for their customers and their store-level employees.
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