Supercharging Retail Economics By Unlocking Workforce Value

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:

• Data and analytics to get the right people doing the right roles at the right times. Make sure you capture the right data at a store-level, including who is doing what and when – and what it costs you. Often this leads to new staffing configurations and potentially different opening hours. Develop a way to execute on bespoke opening hours, which could save significant payroll dollars without impacting customer experience. Finally, use data to create dynamic dashboards that allow store managers to improve employee scheduling, creating greater visibility and scheduling stability. To do this well, organizations need consistent ways to capture data from POS and scheduling systems, a data pool to pull analysis, and visualization tools that can be accessed at both the corporate and store levels. The data and supporting analytics can reveal tremendous opportunity for efficient scheduling that controls costs without compromising the customer experience.
• Lean practices to streamline work and reduce bloat. Dig deep to understand which activities drive value. Time studies, process workshops and time spent talking to employees will provide the foundation for applying lean and continuous improvement best practices to the way your employees work. Your employees will appreciate this, as they know what wastes time. While you might have to make major overhauls to roles, responsibilities and expected outcome, the end result will benefit both employees and customers.
• Employee engagement techniques to increase tenure. Your existing employees are valuable and should be retained, as the cost of training new employees is high. Leaders in employee retention transition significant portions of training costs to employee engagement and retention activities. Career planning is a powerful tool to drive retention.

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:

1. Identify an executive sponsor to drive alignment and focus
2. Have an operating plan in place to drive quality execution
3. Make sure there is a change management specialist on the team to help employees navigate change
4. Put KPIs in place, report against them and react
5. Develop a governance structure to drive results.

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.

About The Author

Brandon Pemberton is a retail consultant with Point B, an integrated management consulting, venture investment, and real estate development firm.