When Retailers Mistake Their Most Important Asset As A Cost

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For years we’ve heard that employee expenses are driving retail profit margins down; as a result, labor hours were cut.

That meant shoppers were more likely not to see anyone working in a store, that they most likely would have to wait for assistance, and would have to wait in line to pay.

That led customer service levels down across the board and still today it is pummeling retail traffic across the world.

Many retailers see their retail employees as a cost center, the opposite of an asset. They are something to be minimized.

That’s why, to keep down the expense, they try to get away with the minimum needed to cover the floor. And that’s a mistake.

Brian Field, Senior Director at ShopperTrak, notes, “The more you cut your labor hours, the better your labor looks.”

But there’s a problem with that and that’s why ShopperTrak advises clients to instead measure using shopper to associate ratio. That number can go up or down, depending on the level of service that a brand is intending to provide.

The lower the shopper to associate ratio you want to have, the better trained your employees must be.

You can’t say customers are the major focus of your business and then provide three-person coverage on a busy Saturday.

But it’s not just employees you need to value as an asset, it’s their training.

A friend of mine related an experience her son had while working at a Michelin-rated restaurant in New York. To keep their rating stars, they are mystery-dined each year. There are separate ratings for food and service. Last year this restaurant received a 93 on the food and 83 on the service. This year they received 96 on the food but only 73 on the service.

When the owner told the staff, the chef quit. He could not afford to let their lack of training investment tarnish his cooking reputation.                       

When employees feel undervalued and disrespected, they leave – and they are almost always your most valuable – the ones a company can least afford to lose, in this case, the chef.

Training isn’t microwaveable, it has to always simmer.

According to a joint study by the RAND Corp., Harvard Medical School, and UCLA and published as The American Working Conditions Survey, the American workplace is physically and emotionally taxing, with workers frequently facing unstable work schedules, and it noted that workers who have to face customers endure a disproportionate share of abuse.

And why do they feel abused?

Because they are not being trained how to engage strangers…

Not being trained how to present products…

Not being trained how to reach their sales goals, and they are …

Not being trained in customer service.

They’re pretty much left to their own ideas of how to get through the day.

Training shows how much you value your associates.

A well-structured retail sales training program and a culture of constant learning signals to the individual that they are greatly valued. When they aren’t trained how to engage a stranger and develop rapport, it leads an employee to feel they are not valued by the company as they are unprepared to do their best.

Because they do not feel valued, they call in sick, give poor customer service, and have high employee turnover results.

And when you’re too cheap to train them, you’re going to pay dearly in five-finger discounts by both employees and shoppers, and you will have to offer promotional discounts to move your merchandise as well.

But you probably don’t see these costs as liabilities to your profitability, you just see them as the cost of doing business. 

Big mistake.                                                                   

Check out my customer service primer for retailers looking to raise conversion rates

In Sum

Retailers are fooling themselves in many ways. 80% of companies believe they deliver a superior experience to their customers yet customers of those same companies say only 8% of them are really delivering.

In many ways, there is a disconnect between how retailers want to sell value over price and the way they hire and train their employees.

You can only sell value over price if you have a ruthless focus on the customer first.

When you have fewer and fewer salespeople on the floor and you have to shake your head at the blunders you hear on your sales floor because they don’t know better...

When that happens, your greatest asset is really your highest liability. No wonder so many retailers have a conversion problem.

But when you look at your employees and more importantly, the cost of training those employees as an asset – you’ll look to do even more with them. And when you start a new initiative, they’ll help you achieve it and hold onto your customers.

As presented in Leading On The Edge Of Chaos, reducing your customer churn rate by just 5% can increase your profitability by 25% to 125%, so you have the potential to get much more back from your investment than from withholding the tools and retail sales training of your employees.

You’ve heard it before but it is still true, you can’t cut your way to growth.

As holiday merchandise begins arriving, decisions about your staffing and training will determine your chances of success.

Don’t be cheap, plan to hire more than just a skeleton crew, and give all your employees the retail sales training they need to want to work harder for you.