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Talking Business: Enhance productivity to tackle the living wage challenge

Retailers face significant cost challenges over the next couple of years as the combined impacts of pension auto-enrolment, the apprenticeships levy and the national living wage all increase payroll. However, there are some inventive ways to boost productivity that could help.

Among the companies to have announced that prices could rise to offset their costs are Next and Whitbread, owner of Costa Coffee and Premier Inn.

Forward-thinking retailers are working hard now to ensure they have a cost-base trajectory that helps them increase employee productivity and control spending without impacting on customer experience and sales.

Useful tactics include carrying out a detailed review of the process of getting garments to the store to identify opportunities to reduce costs and effort from the replenishment process. Time-and-motion studies to analyse in-store stock processes, optimise stock holding, minimise stock-counting workload and add security tags as efficiently as possible are key. Studies generally show that source tagging is more efficient and cost effective than having store teams managing tagging.

There is an opportunity to leverage productivity from a more engaged and better-rewarded workforce

It is important also to look hard at fitting rooms to ensure opportunities for sales conversion are maximised without creating lots of ineffective time for colleagues waiting for customers. Consolidating fitting rooms across a store and considering unisex fitting rooms can significantly reduce salary costs.

Another method is investing in workforce management technology to professionalise staff scheduling and payroll. A surprisingly high proportion of retailers do not ask their colleagues to clock in and out, yet there is typically a saving of 3%-5% of payroll when this is introduced. Savings result from all absences being logged and communicated to the payroll system, as it can be easy to forget to report absentees, and in busy stores with large teams to not notice a colleague is missing.

There is an opportunity to leverage productivity from having a more engaged and better-rewarded workforce. Effective communication of the improved benefits for colleagues as a result of the changes is an easy way to start, yet can be overlooked. Many retailers are going further and implementing push-based communications such as Nudge Rewards via smart phone apps to build colleague engagement.

If necessity truly is the mother of invention, we can expect to see lots more innovation as retailers find new ways to manage their cost base.

Sue Hedaux is a director at productivity consultancy ReThink Productivity

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