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Problem is exacerbated by lost sales due to over-funding of back office tasks rather than customer-facing activity

The mismatch between the number of labour hours allocated to stores and those that are actually needed means UK retailers are wasting about £2bn* a year, some 7.5%, of their annual wage bill, claims Kurt Salmon Associates (KSA), the leading global management consultancy specialising in retail and consumer products. In addition, if retailers knew exactly what hours were required to complete back office tasks, they would have more funds to spend on staff for customer-facing activity that could drive sales.

“With all the emphasis in retail on cost-cutting, this is an area where a real difference can be made,” says Sue Butler, a senior manager at KSA. “Labour remains retail’s second largest cost after merchandise, but remains out of control for most companies. Research among our clients in Europe and North America shows that most retailers do not have a clear idea of how long it takes store staff to carry out specific processes and tasks so there is often no logic behind the number of labour hours allocated and those that are actually needed, giving store managers a weekly headache.”

KSA says the level of wastage is exacerbated by the fact that typically 40% of store staff hours are taken up by back office support processes frequently involving duplication of tasks and inconsistent procedures - often because job times are not being measured regularly, particularly when a procedure has been changed.

Retailers in grocery allocate most of their store hours - approx 55% - to non-service tasks with the smallest amount devoted to enhancing customer service. In the fashion sector the figure is similarly adverse, says KSA, especially when retailers can potentially boost conversion rates by at least 10% by focusing employees on customer-facing activities that drive conversion.

“The probability of a customer buying doubles if there is interaction with a member of staff,” confirms Sue Butler. “If non-customer facing tasks were made more efficient, staff could spend more time on customer-facing activity, which would result in an increase in sales and potentially a lower wage bill. In addition, if there was better visibility of how time was spent, down to department level, retailers could make clearer decisions regarding the trade-off between cost and service.”

KSA’s research also revealed that many store managers often allocate more hours and focus on those tasks on which they are more rigorously monitored, such as management reporting, queue length and availability of promotion lines. When setting the store these goals, retailers do not encourage the balancing of activities across service and non-service activities and flexing these through the trading week.

“There needs to be a clear message from the board on what is expected and store staff trained to deliver it, with an mechanism in place to alert the business if compliance slips,” advises Sue Butler. “In this way, retailers will ensure their stores continually get the right hours and this could positively impact sales and see a real saving in costs.”

KSA estimates that as a general rule a reduction in labour cost equivalent to 1% of sales can result in an increase in gross margin of 10% to 20%.

“However, arbitrary reductions in store hours frequently come straight out of service, resulting in a downward spiral: no service – lower sales,” concludes Sue Butler.

*Source: This figure is based on figures provided by British Retail Consortium.

Ends.

Note to Editors:

About Kurt Salmon Associates (KSA) – kurtsalmon.com

Kurt Salmon Associates (KSA) is the premier global management consulting firm delivering enhanced business results through tailored Acceleration Programmes in the retail and consumer goods industries. KSA helps clients achieve significant gains across a range of disciplines to stimulate business growth, advance productivity, increase margins and improve inventory efficiency through the effective use of technology. From concept to consumer, KSA's portfolio of services helps clients across the globe achieve lasting, meaningful improvements that create true distinction in the marketplace.

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