As margins are squeezed, retailers are looking to get more out of their staff
Costs are mounting, the competition is ever more aggressive and, thanks to fluctuating currency rates, margins are being squeezed further. Against this backdrop, a growing number of retailers are focusing their efforts on improving productivity. John Lewis, for example, has forecast a gradual drop in the number of people it employs as productivity levels increase and it makes better use of technology.
For many, it simply comes down to cost savings. The cost per hire has been growing over the past two years, as minimum wage levels and National Insurance contributions have risen – and this shows no signs of slowing. Team this with shrinking sales, and retailers are looking at whether they can employ fewer people.
Employers need to try to identify barriers to productivity
Dave Innes, Joseph Rowntree Foundation
One department store source observes: “It’s something we’re seeing across the sector and everyone is mindful of it. Some high street department stores, for example, are reviewing how they can reallocate staff by looking at footfall and the needs of each individual department on the shop floor, to optimise costs and sales ratios.
“If pay scales aren’t being adjusted, the gap [between turnover and staff costs] narrows every year. Keeping people motivated is an important discussion, but the driving factor in the end is cost.”
However, there are inherent barriers to increasing productivity in retail. Dave Innes, policy and research manager at Joseph Rowntree Foundation, the social policy research charity, points out that retail workers are often attracted to the job for its flexibility. More than half (54%) of retail employees surveyed by the foundation last November said they chose their job because they needed to fit it around other commitments. Two in five said it was not worth working harder for a slight increase in pay.
“Employers need to try to identify barriers to productivity from this angle,” argues Innes. “It’s about making sure there are opportunities for progression, particularly where part-time workers are concerned. This could involve bringing in more flexible childcare options, for example, or more careers support for younger workers.”
Retailers are increasingly turning to investment in technology to minimise labour as a commodity cost, replacing some of these roles as a way to boost margins and productivity.
“Technology is a huge issue where we are anticipating major changes over the next 10 years,” says Innes. ”The most noticeable change is where retailers are moving towards online sales.
“The concern is what this will mean for lower-paid workers. It’s unclear whether new technology will enable companies to increase productivity and therefore drive up wages, or replace workers, leading to more insecure and lower-paid work, as well as fewer jobs.”
However, others believe improved use of technology in stores can increase staff productivity and morale.
Colin Temple, chief executive of footwear chain Schuh, says: “We’re using technology to make sure we don’t have constant trips to the stockroom that take up staff time. We provide devices that offer real-time stock data with only a 10-second delay. We are trying to be more efficient with staff time.
Tech is a huge driver of how productivity has changed over the past few years
Colin Temple, Schuh
“We don’t have counters with tills any more, either. For us, 70% of transactions are now through mobiles, so customers don’t have to queue, and we don’t need to print off receipts, making it a quicker process. We also therefore have more space to display our product. All these little things make a difference.”
Schuh is also working towards using automation to make it easier for employees to manage or swap shifts.
“Tech is a huge driver of how productivity has changed over the past few years,” says Temple. “Everyone is screaming out for IT resources to improve efficiency.”
At Superdry, a review of stockroom spaces, warehouse systems and delivery services is under way to improve productivity and enhance the consumer experience.
Superdry founder Julian Dunkerton says: “We are looking to experiment with ideas to improve productivity. For example, we are considering whether we need stockroom space in one of our German stores. It might result in a reduction in staff numbers, but the consumer experience might be enhanced as a result.”
In line with rising technological investment, retailers need to reward roles that involve more specialised knowledge. In this way, increasing productivity might, to an extent, improve pay levels in retail.
Dunkerton believes the image of frontline retail workers as “unskilled” is becoming outdated: “Workers now need to be more skilled. There are so many processes going through the till, for example. What is needed now is not a change in labour force but a local labour force that is more skilled.”
“There was a time when people thought a retail position didn’t need skill, but now it’s becoming very skilled because advancing technology is making its way into all corners of the business.”
Dunkerton concludes: “Tech has changed retail forever. It’s something we need to embrace, and is integral to moving forward and increasing productivity. It is all too easy for retailers to say they are offering in-store kiosks and so on, but if it’s just lip service, what’s the use?”
The way to improve productivity is to focus as much time and human resources as possible on the customer
Ed Martin, Bells Shoes
Ambitions to provide maximum value for customers and investors through more technology-driven offerings may lead to leaner operations, but it could also herald better results per employee.
However, as Temple points out, this is meaningless if staff cannot “embrace” whatever new technology is brought in to improve productivity. It is crucial to ensure it works “on every level” before being rolled out company-wide, otherwise it will ”make no difference”.
Ed Martin, director at Drapers Independent Footwear Retailer of the Year 2017 Bells Shoes, argues that technology should be used to free up time for staff to work directly with customers.
He explains: “On the shop floor, we are using tech to improve the productivity of our business, and are trying to make the best use of the resources we have to create a multichannel offering.
“We use iPads in our store, and offer collect-in-store or deliver-to-home services – we ensure that stock is where the consumer wants it. We have had this set-up in for the past two years or so. It increases productivity because it helps us focus on the customer [box, below].”
AllSaints COO Peter Wood agrees: “What we do in store is changing. It used to be that staff were there to look after customers who came in, but as footfall declines across the high street and more people now shop online, there was pressure on productivity.
“Our big unlock has been using store stock to fulfil online orders. Staff are not only looking after customers who visit their stores, they are also looking after customers who are shopping online.
“With these additional online sales being fulfilled, we have seen a huge increase in staff productivity, and our retail teams have been fantastic at adopting this evolution. With the same headcount, we are converting digital sales and physical visits. It also helps our stock productivity by driving faster sell-throughs. This has helped us make sure that our retail store operating model remains productive.”
As retailers hunt for savings and staff costs rise, it might become more difficult to maintain margins unless they invest in both technology and training.
At the same time, it is worth ensuring that staff have the opportunity to progress and improve their working lives. Improved staff satisfaction and commitment can lead to greater customer satisfaction – and profit.
So what is productivity?
Measuring productivity as a KPI (key performance indicator) can be tricky in fashion retail – economic output can be difficult to quantify in customer-facing roles where the quality of human interaction is a key determinant.
This is not as much of a problem for value retailers, whose customers are more interested in price than service. But for mid-market and luxury players, measuring productivity is more complex.
“We don’t look at it in terms of how much cash is brought in per day, or minute,” explains Superdry founder Julian Dunkerton. “It’s about how happy consumers are – that’s the key.”
Ed Martin, director at independent footwear retailer Bells Shoes, agrees: “We have never really followed a strategy of calculating output per employee. We believe it’s better for business to operate at team levels rather than going down the route of individual targets to drive sales, and people prefer to work in teams.”
Although there is no set industry standard, productivity is fundamentally thought of as output produced per unit of input, and is traditionally measured as sales or profit per unit of labour cost, which might be per employee, or per hour worked. Some also look at the number of customers served per person or hour, or sales per transaction – or weigh up the number of staff hires against new customer acquisition.
Colin Temple, chief executive of footwear chain Schuh, suggests using technology to help calculate productivity: “You have to try to get more out of your resources. When it comes to measuring the effectiveness of people, you could use technology that can help predict this, such as customer counters.”