Reducing labor costs can reduce a retailer’s sales and customers, too

It’s no secret that brick-and-mortar stores are under the gun to decrease operational expenses; but reducing labor costs – one of retailers’ most-commonly used cost-cutting measures – often leads to understaffing.

A recent Retail Dive report shows that slashing labor costs – which may seem like a great way to reduce a retailer’s budget – can instead lead to poor customer service, a negative in-store experience, and in turn, lost sales and profits. And what retailer can afford to lose customers, sales and profits in today’s ultra-competitive, omnichannel environment?

The December 2017 article, based on a study from the Massachusetts Institute of Technology Sloan School of Management, reminds retailers of the importance of good old-fashioned customer service. When potential customers can’t find store associates to help them, businesses quickly lose retail sales and resulting profits – not to mention the potential for repeat business.

Its lead researcher, Rogelia Oliva, said, “Retailers need to move past the inclination to minimize cost by understaffing stores because it has a big impact on profitability. They could generate more sales if they have staff at the correct level.”

Retailers historically have based staffing levels on sales quotas. However, Oliva suggest store traffic should be the key metric instead of sales because scheduled labor may be unable to meet customer traffic flows.

Balancing staffing levels, labor costs, sales and store traffic

Reducing labor costs can reduce a retailer’s sales & customers, too

But it’s a catch 22 for retailers trying to perfect the balancing act of reducing labor costs while increasing store traffic, sales and profits. In fact, a separate study from the University of Pennsylvania’s Wharton School of Business, states that “Intuitively, the level of store labor should impact sales, so setting store labor to a percentage of sales forecast is circular and fails to take into account how store labor impacts sales. In the worst case, this approach leads to a spiraling effect: a low sales forecast leads to reducing labor which leads to lower sales and so on.”

So, what’s a retail operations manager to do when it comes to having the right amount of staff – short of looking into a crystal ball?

Understaffing and the customer experience

There are many factors to consider when it comes staffing the right number of employees to meet customers’ needs. Consider:

Are customers waiting too long to check out? According to this post, “The greatest friction for shoppers is waiting in line to pay for something, closely followed by them having to wait to find someone who can assist them.”

Are employees available to help boost sales and add to the customer experience, or are they just trying to get them out the door? While some customers know exactly what they want and wish to be in and out of a store quickly, others not only want but need the assistance of a trained associate.

What amount of sales are you losing because employees aren’t available to upsell? Whether it’s a scarf that complements a sweater, shoes that make an outfit magnificent, or a wine that pairs perfectly with a meal a customer plans to cook at home, countless sales are lost when employees aren’t there to suggest add-ons. Not to mention earning customer loyalty that personalized service can provide.

What manual tasks could be automated? If employees are bogged down with tedious tasks that could be automated through retail technology, you are losing sales. And wasting labor costs.

Perhaps, the answer to offsetting labor costs isn’t to cut staff but instead to implement retail technology that allows the employees you have to maximize their time on the floor with your customers.

LiveDrawer™ helps reduce labor costs

A variety of retail technology exists to help retailers improve efficiencies and reduce labor costs. And while each has its own benefits, automated cash management systems benefit retailers in numerous ways – including offsetting labor costs by helping boost employee productivity.

The LiveDrawer solution is a software/hardware system that includes an intelligent cash drawer that automatically counts bills and coins the moment they are placed in the drawer; the accompanying software provides remote, real-time accessibility to customizable dashboards. This allows managers and the head office to view details of each and every transaction and run reports that, among other things, can help optimize employees’ time on the clock.

How? LiveDrawer…

  • Allows more-effective cash drawer replenishments.Customers don’t have to wait for the correct change because it’s always there. LiveDrawer Manager™ alerts managers when a certain denomination is low and allows them to add money to a drawer before it runs out.
  • Assesses cashier competence and performance.If an employee short-changes a customer, it’s a negative experience for all involved. Immediate alerts ensure these mistakes are corrected on the spot – stopping a potentially bad incident in its tracks. LiveDrawer also shows who could use additional training and which cashiers are star performers – allowing managers to make sound staffing decisions.
  • Provides seamless shift changeovers.How long does it take your employees to manually reconcile tills or count and recount a drawer during shift changeover? If you pay overtime for this process – or even if you don’t – an intelligent cash drawer system reduces an approximate 15-minute process into a two-minute one. Meaning your employees can spend one-on-one time with your customers rather than one-on-one time with your cash.
  • Helps reallocate employees’ time.Since LiveDrawer knows the exact amount of cash in a drawer, your cashiers don’t need to leave the floor early to cash up. Instead, they can spend more time on the floor with your customers – whether at the register or helping elsewhere.

Intelligent cash drawer helps maximise sales and profit

In summary, Tellermate’s LiveDrawer delivers detailed data that allows retailers to make more informed decisions when it comes to their cash. This optimizes efficiency and increases accuracy. It helps reduce the amount of time employees spend handling and managing cash. And frees them up to become your store’s ambassadors, your shoppers’ personal assistants, and the salespeople who can truly help create positive customer experiences.

And as Oliva stated in the retail study he helped conduct, “Stores should staff to maximize sales and profits, not to minimize costs.”

To find out how LiveDrawer helped a large, well-known European retailer eliminate redundant manual processes, reduce labor hours without reducing headcount – and provided employees more face time with customers, download the LiveDrawer case study.

LiveDrawer Case Study

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