Retail HRM

Retail HRM - Importance

Convenience , assortment and pricing are largely
effective earlier.

Only way to distinguish is thru sales service

Retailers spend millions of dollars in driving

customers to the stores but does not invest in
labour planning to ensure that the traffic is
converted to sales
 Retail HRM
Consumer experience in the store is a combination of product and
service (predominantly human service).

In retailing employee form an important cost- Usually the second.

Since retail is a thin margin business the employee number ,

productivity and costs forms the core of the business

Employee number depends on the type of product sold.

Routine - Minimal

Speciality - Maximum
 Retail HRM
Retail employee

There is close relationship between

employee and customer satisfaction .
Hence managing retail employee well is
imperative.

Front end

Back end
 Productivity Metrics
Square foot coverage area per employee

Square foot sales area per employee - Gross margin return

of labour - GMROL

Gross margin return should be used in conjunction with

Gross margin return on space and Gross margin return on
inventory

Gross margin return of labour should be optimized not

maximised
Type of Employees in Retail
Core employees - Full time employees. On the rolls of the company.

Short term contract employees - To handle spike in sale during a particular

period

Apprentice- Trainees who are learning the job

Part timers- Used predominantly in advanced countries

Consultants- Fashion design consultants; beauty consultants

Sub contracted employees - Out sourcing of certain jobs- Like House keeping

Self - employed agents -Commission agents not on the rolls , but operate outside
the store and instrumental in bringing in the customers - Taxi drivers and tour
operators who bring tourists to a retail store
 Issues in Retail HRM

Unstable scheduling

Schedule varying on day to day basis

Eliminating on call

Posting the schedule two weeks in

advance
Experiment Done at Gap
Giving them a guarantee of 20 hours work per week

Establishing standard start and end time

Giving them consistent schedule

Swapping without manger’s approval

Receiving additional staff during understaffed period

which is identified based on store traffic and
conversion rate data
 Results

Sales increase - 7% - Companies struggle to

achieve 1-2% increase

Productivity grew by 5%. Industry average is

only 2.5%
 How is this possible?

Increases basket size

High Conversion rate

Both due to better sales service

 Benefits
Employees felt more in control of their work

Helped in shaping consumer experiences better

Improved sales

Improved productivity

Customer service is good

Decrease in theft

Orderliness of the stock

Decrease in “phantom stock out” - When the consumer is told an item is out of
stock when in fact it is just out of place
 Why retailers use unstable
scheduling then ?
Role of cognitive bias

Humans tend to outweigh what is immediate and easy to measure

Pay given to salesperson is evident and seen every month

Training costs are evident

Underweigh longterm and harder to measure

But the cost of unstable scheduling is not evident

Impact of knowledgable sales on revenue is difficult measure

This self delusion

 Why retailers use unstable
scheduling then ? Cont.d
Agency Misattribution

Head quarters - Short term numbers

Stores- Sell more in the long run

When different entities have different

objectives , co ordination failure happens and
two entities blame each other
What is needed to sustain stable
scheduling ?

It is not Human resource issue .

Concerted strategy at the top and also

includes Operations, Marketing and Supply
chain
 Retail staff reduction

Age old strategy

Cutting staff - Head count fallen by 10% in the

last decade

Wages has dropped by 4%

No training
 How to determine the optimal
number of staff and training ?

Staff cost is expendable ; variable cost ; second largest

Every rupee saved on reducing staff will lead to loss of

several thousand rupees in sales and gross margin

By customers leaving the store empty handed because

of non availability of experienced sales associates

By poor customer service

When do stores benefit from more
sales staff?
Stores with great sales potential as indicated by the average
basket size and average income in their catchment areas

More competition - as indicated by the no of stores

Key is

Right numbers

Right training

To produce value
Optimize the staffing levels
Use historical data on absenteeism to estimate the effect
of staffing

If 30 are scheduled to work in a store and only 27 turn up.

How do actual sales compare to the estimated?

If it meets the forecasts then the store is overstaffed

If they are down by 10%, then increasing the staff by 10%

would increase the revenue by 10%
Optimize the staffing levels- Cont.d

2.Validate the results

Take two type of stores - Test and control stores

Change the level of staffing in test stores and maintain the same level in control
stores

Increase pay roll in 25 test stores by 10% and leave it unchanged in control stores

If the revenue increase is 8% and 1% , then the net impact of staff increase is 7%

Profitability of the additional revenue is also important , calculate the gross

margin on the incremental revenue minus the cost of additional pay roll to
generate them
Optimize the staffing levels- Cont.d

Optimize staffing chain wide and measure the results

Apply it for the entire chain of stores

Extra dollar spent on the pay roll would generate between 4

-28 USD additional revenue

This new labour plan is not the end point . These factors will
change over time and hence Retailers have to repeat the
process at regular intervals
 Sales staff training
Two types of training

Process training

How to perform tasks such as restocking shelves,

executing product return etc

Product knowledge training

Features of store’s offering so as to help customers

decide what to buy ?
Product knowledge training

1.Track sales by associate and incentivise

people to want training that will help them
more

Sales commission is the simplest way to do it

Product knowledge training- Cont.d

Identify the product information

Most of the brands would pay for them.

Hence it is not an expense for the retailers
Product knowledge training- Cont.d

3. Collect data on training activity and compare it with data

on individual employee sales

Put knowledge thru online tests

Time spent on training

Control for

Experience

Time of the day (Weekdays/weekend )

 Benefits of the training
Every online module associates took increased their sales by 1.8%

Sales person reported great confidence in their selling abilities and product knowledge

Knowledge could be applied to selling same offerings in the same category

Effect of training varied with different groups of sales people - Divided into four groups before the
training

Top level associates increased their sales by 1.6% (Avg was 1.8% for all associates )

Second tier - 4.26%

Third tier was - 1.4%

Bottom most - No effect

Structured Empowerment of Sales
Staff
Adaptation

Each store mgr can decide on the assortment - Will result in stores of the same
chain looking and stocking things very differently

Standardization

Not catering to the local needs of the people and and not discovering
profitable niches in the local market

Between these two is the structured empowerment

It consists of bestowing on employees (1)the power to make choices from a

narrow set of options across the select set of components (2) responsibility
to deliver the company’s value proposition to consumers
 Requisites for structured
empowerment

Defining the core elements of customer value

proposition

I. Core attributes of the offering that will compel

target consumers to transact with the company

Elements on which the company will not compete

with its competitors
Structuring Empowerment to deliver
customer value proposition

Input components - Predominantly physical - like location,

building, architecture

Process components - tasks involved to deliver value proposition

Which of these components to be standardised and which one will

be adapted needs to be discussed.

Customisation is determined by data and also by regional and

frontline staff
Step 2

What results based standards managers and

their units will be held accountable for and
how those results will be rewarded ?