Minimum and “living” wages are going up. These changes highlight the need for retailers to have up-to-date automated workforce management solutions to control labor costs and improve productivity and profitability.
Labor costs are one of the largest controllable expenses in Retail. For a typical retailer, labor costs average 10-20 percent of revenues. Other industries, such as food and hospitality, can see labor expenses as high as 30 percent of revenues. No wonder then that finance and store operations executives’ pay close attention to how much their companies spend on labor and its impact on the bottom line.
In the United States, many new proposals to raise the minimum wage at the Federal, State, and City level have put renewed focus on how companies manage their labor spend. However, the need to maximize productivity is hardly unique to U.S. retailers. Rising wages in the United Kingdom, Australia, and other countries have increased pressure on retailers to ensure store employees are working shifts in alignment with business and customer service goals. The chart below summarizes the impact on labor cost increases for just one employee as hourly wages increase:
In addition, changes to overtime regulations in the US have pushed retailers to maximize the efficiency of store employees. Under the new regulations, full-time workers making up to $47,476 per year are now eligible for overtime pay of time-and-a-half. Furthermore, the new ruling, as well as other proposed minimum wage increases, wouldn’t be static and would increase annually. [SOURCE: United States Department of Labor]
In 2015, 14 cities and states including New York, Los Angeles County, Pittsburgh, PA, and Portland, OR approved a $15 minimum wage. [SOURCE: National Employment Law Protection]
Combined, these factors will hit retailers on multiple fronts:
- New overtime rules will negatively impact retail store leadership by making it difficult for store managers to fill in the gaps left by tight budgets, thus negatively impacting overall store performance and eliminating managers from qualifying for bonuses.
- Labor costs will increase quickly and squeeze static labor budgets
- Tighter budgets will limit store coverage, minimizing productivity
With labor budgets stretched thin, retailers can respond in two ways:
- Cut labor spend and, therefore, the number of labor hours in the store. This will negatively impact customer service resulting in reduced sales and dissatisfied customers.
- Optimize labor spend by aligning associates to customer demand ensuring maximum revenue and efficiency. This is accomplished in three key areas:
- Reallocating labor in alignment with customer demand so the right number of employees are working during peak times and excess associates aren’t working during quieter times
- Streamlining store operations processes so that employees complete product launches, promotions, resets, and other sales-driving tasks rapidly
- Ensuring store employees are working when they are supposed to, in compliance with overtime and business rules
Retailers have an opportunity to increase profitability, not only through better control of labor spend but also through increased sales. Sales increases are seen via more engaged, motivated, and better-trained employees, better alignment of labor to customer demand, and flawless execution of retail strategy.
Automated Labor Scheduling: Improved Profitability through Better Operational Practices
Many retailers attempt to manage the scheduling of their store workforce using spreadsheets and pen and paper. The use of these inefficient tools has many drawbacks that result in reduced sales, profitability, and customer service. By entering the digital age and implementing automated labor scheduling, with advanced analytics and employee self-service retailers see benefits such as:
- Improved sales by freeing store management from spending 5-10 hours a week to complete scheduling, approve time requests off, edit time punches, etc. — the store’s best salespeople are freed to spend time helping customers. All these necessary actions can be undertaken on the sales floor via a mobile application thus reducing the need to be stuck in the back room.
- Increased profitability by better compliance with labor laws (reducing labor spend and government fines)
- Higher employee morale by factoring in employee preferences and availability in schedules and allowing them to make those changes digitally from anywhere. Happier associates provide better customer service.
Real-Time Metrics and Alerts Ensure Execution to Plan
Having an optimized labor schedule is an important first step. Retailers also need real-time visibility to ensure employees are working assigned shifts so that labor plans are executed consistently.
Most retailers have some form of automation in place to efficiently capture employee punches and accurately calculate payroll. But, even then, store managers cannot respond to potential schedule violations like overtime without real-time reporting and alerts.
With real-time alerting tied to time clocks, retailers reap huge benefits. Store managers can stop overtime and labor law violations before they occur and field leadership can respond to labor trends in real-time to address demand coverage, suboptimal schedule edits, and mid-week sales trends by having notifications sent directly to their handheld device. Corrective action can be completed in near real time with the use of analytics from the sales floor thus saving valuable time previously used to analyze metrics after the fact.
Task Management: Getting the Best Bang for your Buck
Many retailers still rely on e-mails, binders, and spreadsheets to communicate tasks to their stores (such as product roll-outs, resets, promotions, training, and more). By using these manual tools, retailers cannot track store-level compliance to corporate tasks, manage by exception, or provide stores a simple way to view prioritized tasks. Store managers are inundated with communications and stuck in the office, resulting in reduced customer service.
With a real-time digitized task management solution, retailers eliminate chaos:
- Corporate views the workload impact of tasks on stores and can shift launch dates based on priorities and store capacity
- Store managers view a prioritized list of daily tasks. They know exactly what to do and when.
- Corporate views task completion status in real time. Headquarters and regional managers manage by exception and focus on opportunities for improvement. Strategy is consistently executed in all stores and compliance can be reviewed by digital checklists complete with video and/or picture capability.
Task management also enables stores to re-prioritize activities as conditions change. For example, if an emergency task such as a recall is assigned to stores, it can be prioritized so associates give it due attention.
Untethering store employees from the back office by providing mobile devices further enhances compliance levels and customer satisfaction, leading to higher sales.
Success Across Retail Categories
No matter how big or small, or what category, retailers must execute their labor operations strategy. The good news is that retailers have successfully implemented workforce management solutions and realized the following benefits:
- QSR in the UK: Improved profitability, increased labor efficiency, boosted employee morale, lowered employee turnover, and elevated customer satisfaction.
- Regional US Based Department Chain: A department store chain with 300+ stores reduced labor costs while improving sales and customer satisfaction.
- National auto parts retailer: An automotive parts retailer with 4,000+ stores won the Store Operations Superstar award after implementing a WFM solution.
Reflexis and Cognizant have partnered to implement world-class workforce management and task execution solutions across your retail stores to drive sales and boost your bottom line.
Reflexis enables retailers to execute strategy flawlessly and uncover profit. The Reflexis platform includes real-time store execution, task management, compliance, time and attendance, and labor scheduling. Learn more at http://reflexisinc.com/
From understanding customers to providing a cohesive experience across channels, retail leaders choose Cognizant to help them work better and work differently. Cognizant’s Retail practice helps retailers turn today’s pain points into new business opportunities. Learn more at https://www.cognizant.com/retail