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Mobilising store staff in an omnichannel retail world

In our 2013 study on retailers’ cross-channel strategies, RSR found that virtually every cross-channel fulfilment tactic is being employed by retailers to a greater extent than we saw in prior years’ studies.

In the order of things, that makes perfect sense; after all, since 2010 retailers have been learning how to use the digital domain to bring the brand to the consumer, anytime and anywhere. The purpose of all that effort has been to encourage consumers to become customers – to work their way towards transacting some business with the retailer. For most retailers, that means using the digital domain to give customers new reasons to visit the physical domain – the store. Omnichannel order fulfilment fits the bill. But when we asked retailers to assess their progress in addressing issues related to the integration of the digital domain with the physical one, we found that most retailers have not yet addressed the task of synchronising operational processes across all the selling channels (eCommerce, mobile, and the store). And when it comes to synchronisation of fulfilment processes in particular, “Winners” (those retailers that RSR identifies as over-performers) fared no better than average or under-performers (“laggards”). So fulfilment is the next big challenge – and it’s an opportunity, a rare chance for average and under-performers to get ahead of Winners.

That’s why taking a look at retailers’ service strategy becomes so important. A 2007 study of over 20,000 consumers worldwide by IBM underlined the importance of service in ensuring a great customer experience. According to the study, customer service was identified as one of the key attributes that drive customer advocacy for a retailer. The study further stated that real customer service requires “… a culture of information and empowerment for store employees to make decisions that promote customer satisfaction.” Not only is that statement still true, it’s truer than ever before.

Not ‘Just Like the Picture’

That doesn’t describe the reality of the in-store experience in many stores nowadays. 2007 (the year of the study mentioned above) was before the explosive rate of adoption of “smart” mobile technologies by consumers the world over. Now consumers are empowered with more information at their fingertips than most store employees – including the store manager – have available to them anywhere in the store. But many retailers have spent the last 35 years or so dumbing-down the in-store experience. “Just like the picture” merchandising and customer self-service have been order of the day, and store managers are no longer merchants, but operational overseers. And employees? I remember being part of the hiring team for a new HR exec at my company. When we asked her what her philosophy was about store employees, she glibly explained, “ and toss! We want to manage our turnover rate in the stores to minimise the number of annual raises we have to give out.” Wow- the truth hurt.

So perhaps not surprisingly, recent RSR studies have underlined the fact that many retailers are struggling to keep up with consumer expectations for a better shopping experience. Retailers expect that most purchases generated outside the store will be completed in the store, but to accomplish that new store processes have to be implemented to enable store fulfilment – and that’s a service activity! But retailers don’t want to spend more on labour. In fact, RSR’s analysis of top business challenges shows that the need to “improve customer service while holding the line on payroll costs” is more important than ever.

The challenge for more and better customer service is simple to understand, but harder to accomplish: retailers need to enable stores with the same digitally-enabled visibility into product and inventory that consumers now have, and they need to be able to finish any customer order inside the store’s four walls, even if it was generated outside. And somehow this must be accomplished without adding to labour costs. Most of all, now is the time to get going.

The question is: what’s the best way to mobilise the store staff to meet new service demands from omni-shoppers?

Finding the Time

Retailers clearly perceive omni-channel order fulfilment as a challenge, but also have no desire to increase their labour spend to meet it. So the first order of business is to find the time. RSR’s recent store study asked retailers to judge how in-store labour hours are being spent, and both the challenge and the opportunity came into clear view.

Simply put, store employees are drowning in administrative tasks demanded by the head office – probably the result of that “just like the picture” mindset. But isn’t the reason that we have computers to automate repetitive asks so that we can do something better with our lives? The first step to finding the time for new order fulfilment processes is to reduce the time being spent on non-selling administrative tasks – and technology should be how that gets accomplished. But there’s something even more fundamental – sooner or later, it takes a human with a modicum of training and skills to be service oriented.

‘Ah, But There’s the Rub’

For all the discussion from the analyst and technology communities about trading non-differentiating activities for differentiating services-oriented activities in the store (to meet the ever-increasing demands of consumers for better service), it might be too big of an assumption that merely optimising non-selling and administrative tasks through automation is enough to improve customer service. There is one seemingly unalterable fact of retail life, and that is that many retailers seem absolutely unwilling to hire more people who might be qualified to execute a service strategy, or to train them even if they do bring them on. A lot of this has to do with the basic working pieces of a retail profit & loss statement (especially that of a publicly traded company). “Labour” is typically the biggest controllable expense in the P&L, and everything else is small change. As it has been for ages, when you’ve squeezed all you can out of cost of goods, and you’ve “optimised” retail prices as much as you dare, then labour (and the costs associated with labour, such as training and benefits) is the next thing to go after. When investors are pressuring management to produce more bottom line results, labour often is the hardest hit.

And that’s undeniably what US retailers have been doing in recent years. According to the US Department of Labor Statistics, the overall quantity of retail jobs in 2013 still hasn’t returned to the pre-recession high of just over 15.5 million in January 2008 (as of January 2013 it stood at about 15.2 million). The quality of the workforce is also a challenge; the education level for entry positions is “less than high school” and the average salary of a cashier is $9.78 (in 2012). According to the same Bureau of Labor Statistics, in 2012 the retail and wholesale sectors reported a total of 18.6 million jobs, but had cut a million full-time jobs since 2006, while adding more than 500,000 part-time jobs. The result? Many employees in the store are unskilled, part-time, minimum wage earners.

What technology has been used in stores has been focused on squeezing even more labour costs. The obvious example is self-checkout. But according to a NY Times article published in October 2012, “in the past, part-timers might work the same schedule of four- or five-hour shifts every week. But workers’ schedules have become far less predictable and stable. Many retailers now use sophisticated software that tracks the flow of customers, allowing managers to assign just enough employees to handle the anticipated demand.”

The Biggest Threat to the Future of the Store?

Retailers fret about “showrooming”, the consumer practice of window shopping in a store but buying from an e-retailer (most feared? Amazon, of course). While it is evident that consumers still overwhelmingly choose to conclude their shopping transactions in the store regardless of how they come to make a decision to buy, there has been a steady erosion in store sales in the last ten years, from approximately 98% of total sales in 2004 to about 94.5% now (according to the US Census Bureau).

Unless retailers do something about the quality of the experience for store associates, all the fancy consumer facing technologies in the world aren’t likely to keep customers coming to the store. It’s already happening; according to a 2010 study by Accenture of how consumers use mobile devices to shop shows that a large majority prefer to get information they need on products and pricing from their smartphone rather than from store associates. It’s a small leap from that to pushing the Amazon one-click button.

So the call to action isn’t merely to automate routine tasks so that more time can be spent on customer service. Something also needs to be done about the quality of the job and the people that would execute a customer service strategy. And so far at least, retailers have shown little appetite for doing that.

And so it is that store-bound retailers who are slaves to a low labour ratio could be hastening their own demise. One might bet that the pure-plays are counting on just that. In 2010, New Yorker magazine quoted Jeff Bezos, CEO of Amazon as saying “the physical book and book- stores are dead.” To the extent that information about a product is a reasonable proxy for the product itself, that could happen to any category of merchandise – and so retailers in those categories must find a way to differentiate with service, and that takes humans as well as technology.

This article originally appeared as 'About Store Labor' on the RSR Research website at http://www.rsrresearch.com. It is reproduced with the organisation's permission.

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