If the closest distance between two people is a smile, as the pianist Victor Borge once suggested, then wouldn’t a smile be the shortest path to a sale?
Many retailers are beginning to believe so, apparently. Several major chains, including Wal-Mart, Lowe’s and J.C. Penney, are redirecting their spending to accommodate the customer experience. In what can be considered a throwback to traditional retail values, they are redirecting their money from store numbers and operations to the staff that deals directly with their shoppers.
The move is clearly designed to improve sales (Wal-Mart has previously invested $2.7 billion in employee incentives). However, these efforts are also likely designed to boost recruitment and retention during an economic upswing that presents more employee competition.
At the root of this challenge is employee turnover. The number of unemployed Americans per job opening in September 2016 ranked at nearly its lowest since the start of 2001 — 1.4, according to Employee Benefit Adviser, citing the Bureau of Labor Statistics.
Put in a way Borge might have said it: Retailers, in their fight for good talent, are trying to create more customer-facing harmony.
$3,400 Per Employee
And harmony may be just the thing to improve retention, and expenses. Rivalry for good talent can get costly. Consider these stats:
- The price of replacing a worker who makes less than $30,000 a year is about 16% of that salary, according to the think tank Center for American Progress, cited by Bloomberg.
- With the average U.S. retail employee making just more than $21,000, that shakes out to $3,400 per employee, according to the same story (citing Bureau of Labor Statistics).
- The average turnover rate in retail was 5% a month in 2015, Bloomberg reports.
If 1 million of Wal-Mart’s 1.5 million U.S. associates are non-management, such turnover would translate to $170 million a month — if Wal-Mart pays the average rate.
“Better Align Store Staffing”
Wal-Mart implemented efforts to stem such potential loss with its $2.7 billion incentive plan to improve employee productivity and customer satisfaction. This effort, which includes pay raises, resulted in $200 million in second-quarter bonuses.
More recently, The Wall Street Journal reported Wal-Mart is preparing to cut nearly 1,000 corporate jobs, many in human resources. In September, it eliminated nearly 7,000 back-office positions in its stores.
All of this implies the money invested in customer-facing employees is being siphoned out of other work areas, to the tune of billions of dollars. But Wal-Mart is not alone.
Lowe’s Home Improvement also is reducing head count in order to reinvest in customer-facing workers, according to the Charlotte Business Journal. On Jan. 17, the company told staff it would cut 2,400 positions.
“The changes will better align store staffing with customer demand, shift resources from back-of-the-store activities to customer-facing ones, and enhance our efficiency and productivity,” CEO Robert Niblock wrote in an email to staff.
Similarly, department store chain J.C. Penney is shuttering stores in an effort to invest in locations that make better brand sense. As CEO Marvin Ellison put it to analysts: “It’s a simple question: If we have a location that I wouldn’t want my children to work at, or wouldn’t want my wife to shop at, then we’re going to invest capital and ask if it fits the brand standard.”
Which gets to the heart of the challenge for retailers: Offering a place where talented, creative people want to work.
Why Turnover Is So High
Location of course is only part of it. Several factors, from bureaucracy to intellectual stimulation to (yes) a smile, direct an employee’s path. Following are six reasons turnover is so high.
- Poor training: Standard training usually includes the predictable checklist: how to use equipment, basic processes and the employee handbook. These tools focus on the employer’s needs, not the customer’s. Training should also include a thorough understanding of product selection and use as well as customer preferences.
- Lack of autonomy: This is reinforced in training. If employees are given the tools to better understand customer behavior and how it evolves, they will feel more confident in their service choices. This is empowerment, and it’s an awesome characteristic to see in an employee.
- Dearth of technology: Technology supports autonomy when it provides employees with knowledge. Home Depot, for example, has provided its employees with in-store mobile devices so they can easily locate products and provide information to customers.
- It’s boring: Working the aisle may not be a laugh riot every minute, so the onus is on employers to provide proper stimulation. Engaged workers will be motivated by intellectual challenges as well as rewards. Those who are not might be in a job that fails to align with their talents.
- Poor alignment: Some people were born to sell; some were born to stock shelves or create beautiful displays. While it’s good practice to ensure each worker is familiar with all tasks, it’s a mistake to force them out of their comfort zones. Retailers can implement employee surveys to recognize the unique talent of each worker, or simply ask.
- Uncomfortable fit: Sometimes, the person and the brand just don’t make good bedfellows. Even Zappos.com, known for its excellent work environment, recognizes not all who complete its training will be a good fit. So it offers all its new call-center workers $3,000 to leave the company. That’s one happy way to eliminate a potential unhappy situation.
If practiced, each should lengthen the distance between hiring and quitting dates, and that should be something to smile about.