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Why Retail Survival Depends On Investing In Employees

Why Retail Survival Depends On Investing In Employees

According to Retail Dive, executives at Best Buy have spent the last several years rethinking how to boost customer engagement.

And as the big-box retailer discovered: employees should come first. In fact, Best Buy seems to be getting ahead by improving customer satisfaction through employee investment.

What Retailers Need to Learn About the Importance of Employees

Best Buy has come a long way since 2009 when it was predicted that like it’s competitor Circuit City, the electronics retailer would be forced to close its doors. But in addition to matching Amazon’s prices, Best Buy also recognized a huge advantage in having knowledgeable, trained people on the sales floor to deliver service. In fact, it’s sales staff is the primary focus of its “Building The New Blue” initiative.

The organization decided that in order to make customers feel the love, their employees needed to feel it first. “It shouldn’t be hard to work at or shop at a Best Buy Store,” said Shari Rossow, VP of retail operations.

It looks like they have the right idea, especially considering that turnover—which is as high as 60%—continues to be an ongoing problem that’s preventing retailers from delivering higher levels of service to customers. With the convenience of e-commerce and free two-day shipping, service in this day and age has become a key differentiator for physical stores.

In addition to reducing transaction processes and training times, Best Buy’s people-first leadership has helped to drop employee turnover by double digits.

Sadly, most retailers don’t view employee investment in the same light, shooting themselves in the foot by getting rid of the people that can actually make a difference.

“Retail stores and the personal touch that their retail employees can deliver is their greatest competitive asset against the onslaught of Amazon and online shopping.”

~Forbes

Transforming Best Buy into a great place to work drastically reduced employee churn—demonstrating that the investment the company has made in employee training and development will continue to pay off.

Why Retailers Must Invest in People to Maximize ROI

By lowering personnel costs in an effort to improve their bottom line, retailers are actually costing themselves dollars on the top line. “Retailers need to move past the inclination to minimize cost by understaffing stores because it has a big impact on profitability,” states Rogelio Oliva, professor of business at Texas A&M. “They could generate more sales if they staff at the correct level.

'Stores should staff to maximize sales and profits, not to minimize costs.'Click To Tweet

In order to find their way back to growth and profits, retailers must adopt a whole new approach to staffing.  Oliva suggests that retailers adopt a mantra such as, “I’m going to develop my people. I’m going to train them. I’m going to give them a career path.”  Those willing to live by this mantra will discover a whole new future for their businesses.

It’s Not Enough to Have Warm Bodies on the Sales Floor

Employees must be trained and developed in order for retailers to achieve a profitable return on investment. While retailers are desperate to reduce costs, if they aim to minimize labor costs, eventually they’ll get what they pay for—mediocre performance that “confirms” the belief that employees don’t add value.

Unfortunately, this attitude has resulted in an endless feedback loop when it comes to measuring employee contribution with retail performance.

“Overworked workers on understaffed retail floors can never provide good service which just reinforces management’s opinion that mediocre performance is what is expected. So they don’t see the benefit of staff and the erosion continues. They have dumbed down the job to the point that they can pay whatever they’re paying if their goal is to minimize costs.”

~ Forbes

By refusing to acknowledge the real and measurable value of retail employees, retailers have no reason to train them or develop their skills, effectively making them expendable.

After rigorous retail experiments, as well as studies of service quality, Rogelio Oliva discovered that in any service industry—most especially retail—management practices such as pervasive understaffing and failure to train and develop employees, are eroding service to the customer and sacrificing sales as a result.

“By staffing correctly, retailers can turn traffic into customers, not just passersby. Knowledgeable people can help the customer and make that final transition from shopper to buyer.”

~ Forbes

'To realize the benefits of proper retail staffing, managers must invest in their essential human capital.' Click To Tweet

Conclusion

Creating the store of the future shouldn’t just hinge on what that looks like for customers. Careful consideration needs to be placed on what the future looks like for retailers who don’t invest in their employees.

“Retailers in this disrupted retail marketplace have the solution to their struggles all around them; it’s there in the largely unrealized potential of their employees. They can unlock that potential through training and professional development . . . “

~ Forbes

While retailers may think reducing labor costs will improve their bottom line, they fail to measure the impact that it will have on their revenue top line. After all, retailers can’t afford to let their in-store customers leave unhappy, frustrated, or empty-handed because they skimped on staffing and/or employee training and development.

And that’s where the real losses will eventually show.

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About The Author

Sherene Funk

Sherene Funk is the author of the contemporary romance Autumn in Your Arms and the eBook The Small retailer's Ultimate Guide to Increasing In-Store Sales. She is a voracious reader who owns more books than she can ever read in this lifetime (but that doesn't stop her from collecting more). A graduate of Brigham Young University, she has published several humorous non-fiction articles and worked in advertising for many years before moving to her current position as a writer on modern retailing at Rain Retail Software. She researches non-stop to see what successful retailers do and loves to share what she learns with other small business owners through informative articles that address their unique needs.

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