Retail Surgery: How can we manage the impact on labour costs?

In the past five years, retailers have faced dramatic shifts in demand and cost structures brought about by factors such as online retailing, the grocers’ push into non-food and the rising cost of property.

Retailers trying to differentiate themselves from web-only competitors by focusing on selling services as well as products put additional pressure on their ability to deliver operational excellence.

Sanjay Bailur, a managing director at AlixPartners, says that in addition to the big strategic questions around what to sell and how to sell it, retailers must refocus on basic retail disciplines such as delivering great customer service while maximising the return on invested labour (ROIL).

Bailur points to Jessops as one example of a retailer that has grown sales and margins in a very challenging trading environment. In particular, in addition to dramatically growing its online sales, Jessops has broadened its in-store focus from products to services such as photography courses, photo-book design, large-format printing and cloud storage. This has enabled it to differentiate itself through the advice provided to customers by the staff in its stores.

Service-focused retailers need not only appropriate staffing levels, but also staff with the right skills and knowledge at the right times to improve conversion rates and establish trust with the customer. Bailur concludes: “By treating store labour as an investment and not just a cost, the ROIL approach allows retailers to focus on driving sales as well as reducing costs.

This requires highly quantitative, evidence-based and targeted allocation of labour, rather than just gut feel.”