Retail consumers today expect in-store shopping to be as convenient as shopping online, with the added benefit of talking to a knowledgeable employee about the products they’re hoping to buy. However, it’s clear that retail workers aren’t trained or managed in a way that allows them to deliver a customer experience that is passionate, knowledgeable, and engaged.
According to a large 2008 national survey, these workers do not lack work ethic or commitment; they lack support from their organizations that would allow them to stay in their jobs. There are three major reasons that today’s retail workers aren’t able to meet customer expectations and eventually leave. In this article, I outline these three reasons and provide examples of large-scale retailers that have overcome these hurdles to cultivate an engaged and productive frontline retail workforce.
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1. Unpredictable scheduling
Conventional wisdom says that it’s part-time and on-call scheduling practices that have made big retailers more nimble and profitable (part-time employees aren’t eligible for employer benefits in most states, which significantly reduces employer costs). However, such practices have an outsized negative impact on retail associates. In fact, inconsistent scheduling is a top reason that hourly workers leave their jobs. Research has shown that unpredictable scheduling, lack of advance notice, on-call and “clopening” (closing one night and opening the following morning) shifts reduce employees’ sleep quality and sense of happiness and increase their stress levels. Employees with families, or those that work multiple part-time jobs to earn full-time wages, are especially disadvantaged with unpredictable scheduling practices.
What if conventional wisdom is wrong? An experiment in Gap stores showed that creating scheduling consistency is not only possible, but is also more profitable. For 35 weeks, three experimental stores committed to eliminating “on-call” shifts, posting employee schedules two weeks in advance, guaranteeing associates 20 or more hours a week, establishing standard start and end times for shifts, granting more associates a consistent weekly schedule, using a mobile app to allow associates to easily swap shifts and see when new shifts are made available, and adding additional staffing during understaffed periods.
These changes resulted in a 7% increase in sales and a 5% increase in labor productivity. It is estimated that Gap earned $2.9 million because of this experiment, a high return on their investment given their out-of-pocket investment in the project was $31,200.
While stable scheduling is undoubtedly a major undertaking that requires buy-in at every level of the organization, it benefits both employee well-being and an organization’s bottom line.
2. Inadequate training
Retail workers are often seen as interchangeable and replaceable cogs in the wheel of store operations and are trained accordingly, learning the most basic skills and essentials in the shortest amount of time so they can get on the floor as quickly as possible. Unsurprisingly, this has clear negative implications for customer experience: a 2017 study from Tulip Retail found that over 80% of shoppers felt they were more knowledgeable than the store associates helping them shop. Moreover, poor training also has negative implications for the employee experience. Employees who are unsure of their work role are unlikely to be motivated to perform to the best of their ability and are likely to make more errors.
Retailers can look to Best Buy, the world’s largest brick-and-mortar electronics store, for excellence in employee training. After facing a period of decline and uncertainty in the early 2010s, the retailer has returned stronger than ever. The centerpiece of Best Buy’s “Building the New Blue” growth strategy focuses on creating an unmatched customer experience by investing in employee training and development, so they are the most knowledgeable staff in the industry. As opposed to classroom-based learning methods that were once the standard for Best Buy’s training programs, new training methods include virtual, video, and online learning, as well as refresher courses to maintain one’s expertise. The changes have paid off: Employee knowledge is the highest it’s ever been, customer satisfaction is consistently rising, and the retailer just ranked number 3 on Training magazine’s list of the world’s most successful training programs. By empowering sales associates to deliver personalized, expert service, Best Buy has decreased employee turnover and increased customer retention, leading to $40 billion in sales a year and dramatically increasing stock prices.
3. Poor compensation
The most obvious investment in human capital is a financial one, but retailers often see labor as a cost to be managed rather than an asset to be leveraged. Labor is typically a retailer’s largest controllable expense, accounting for more than 10% of revenues. In times of economic hardship, retailers will often decide to mitigate declining profitability by reducing or stagnating wages. Data have shown that, though minimum wages have risen, pay for retail workers has stagnated, even for those with ample experience in their organization.
If retailers view employees as assets to be leveraged, the story changes dramatically. When it comes to the gold standard for employee compensation in the retail industry, one needs to look no further than wholesale club Costco. Store employees at Costco earn significantly more than their counterparts at the retailer’s largest competitor, and are compensated for experience. Costco announced in March it was raising its minimum wage to $15 an hour. After just a few years, new employees can earn more than $20 an hour after five years with the company. (Average pay before the recent increase in the minimum was $23 an hour.) It’s clear that this model works: Costco enjoys less than a 6% turnover rate (compared to 60% in the retail industry and 15% across all industries in the United States) and over $138.4 billion in revenue last fiscal year (vs. $59.2 billion for its closest competitor, Sam’s Club).
Conclusion
For too long, retailers have avoided investing in their human capital, instead opting to reduce labor costs through part-time variable positions, inadequate training, and slashed or stagnated wages. Retailers like Gap, Best Buy, and Costco have recognized that the key to financial success is frontline success: creating schedule stability, developing their workers’ expertise, and offering a living wage. Workers that are trained well will be able to provide customers with an excellent shopping experience. Workers that are treated well will be motivated and excited to do so.
