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Talking Business: Living wage is the price for success

With a shift to online sales and increased pressures on store costs, any rise in the overall wage bill, such as that commensurate with the introduction of the national living wage, should provide the catalyst for fashion retailers to take a step back and consider how they can respond to this new situation.

While many retailers will, inevitably, be faced with loss-making stores it is important to recognise that each store does not need to fulfil exactly the same role and offer the same mix of services. Retailers must expedite their store format development and define a set of differentiated propositions: range, services, stock, layout, technology and customer interaction to match an individual store’s needs to its individual customer requirements. This can be a powerful way to manage profitability across a diverse store estate, while delivering a consistent customer experience.

Technology also offers a huge opportunity to increase productivity and sales. Some retailers are exploring using mobile devices to manage in-store tasks, integrated with scheduling tools and traffic-counting systems. Technology that improves customer engagement can also lead to higher conversion rates and ultimately increased sales. If the introduction of in-store kiosks or staff iPads was previously discounted as too expensive, it may be time to rebuild the business case with the latest conversion statistics.

The rising popularity of click-and-collect underlines the importance of the store in the omnichannel world. While offering this service may cost 3%-4% of the wages bill, it can be a money-spinner. House of Fraser has shown that it is possible to translate click-and-collect from a retailer’s nightmare into a competitive advantage. Through the provision of tech-assisted staff, deployed at peak times, orders are fulfilled quickly and most importantly, conveniently. It’s incumbent upon all retailers who offer the service to optimise the process for managing orders, collections and returns while educating staff to close sales and trade customers up. Of course, none of above tactics will deliver the necessary results without effective staffing, increasingly the largest and most expensive cost.

The first issue to resolve is store management – are they managing or doing? Supervisors commonly spend up to 60% of their time completing sales assistants’ tasks and this has significant impact on store productivity. Most retailers have staff in the wrong stores, the wrong departments and typically at the wrong time of the week/day. There is an urgent need to review staffing and the mix between managers and colleagues, and to optimise the balance of full- and part-time staff in line with trade patterns.

There is no doubt that in the future sales associates will need to be more skilled and increasingly adaptable for retailers to reap the sales benefits of an omnichannel proposition. To attract the right talent, fashion retailers may have to increase their wages bill beyond the living wage. Witness the race among the grocery trade to pay the highest hourly rate in the market, as retailers try to outbid each other.

The national living wage is not in itself an insurmountable problem for retailers; rather it is a call to action to think carefully about how best to succeed in the brave new omnichannel world.

Sue Butler is a director at consultancy firm Kurt Salmon


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