Increasing Retail Profitability Between Back-to-School and Black Friday - ShopperTrak

Increasing Retail Profitability Between Back-to-School and Black Friday

Article

While at this year’s Retail Summit, I had a thought-provoking discussion with William Bennett, Retail Sales Analytics Manager at The Journeys Group, about seasonal associates and how to prepare for the holiday season (which I’ve blogged about in the past here and here).

William, who had just come from our ‘Investment for the Holidays’ session, appropriately pointed out that while the session thoroughly explored what a retail ops team and a store team need to do in order to prepare, the staffing timeline didn’t take specialty retailers, particularly those with two meaningful seasons, into consideration. In William’s case, the back-to-school season (i.e., July through early September) requires as much emphasis as the holiday season (i.e., Thanksgiving through the end of December). And business and traffic spikes during these periods dictate the need for higher labor coverage. However, the approximately 10-week gap between the after-school slowdown and the Black Friday ramp-up causes an issue as it relates to seasonal staffing. Specifically, traffic lulls cause a lower staffing requirement.

Since peak staffing isn’t needed for those 10 weeks, these retailers are forced to do one or more of the following:

  • Reduce staffing through seasonal hire terminations (or performance management) and then start the hiring process over again closer to Thanksgiving
  • Decrease seasonal (and/or other part timers) weekly hours to a bare minimum until special events or Thanksgiving and risk losing those associates due to lowered morale or competing jobs/activities
  • Retain the stronger seasonal hires and risk exceeding weekly labor budgets until events and holidays require a higher allocation

None of these are ideal if you are concerned about both customer service and your bottom line. And employing one of the first two practices means that you are back in hiring mode in November, which includes recruiting, interviewing, paperwork processing, orientation, and training.

The time an existing store team must take from current tasks, coupled with the investment in bringing on an untrained new hire, is rarely considered beyond adding floor coverage hours during November and December in budgeting.

According to a blog post from Zane Benefits, it costs 16% of annual salary for high-turnover/low-paying jobs (earning under $30,000 a year). For example, the cost to replace a $10/hour retail employee would be $3,328. SHRM puts that number higher, at $4,129, and indicates that it takes as many as 42 days to hire a regular associate (non-season). The $3,300 – $4,100 range doesn’t include the time it will take a manager (or mentor) to teach new hires about: operating systems, products and customer service expectations.

For the sake of argument, let’s assume that the all-in costs of seasonal hiring rounds to $3,300 per person (regardless of their hourly rate and their number of intended hours worked). As I mentioned earlier, this cost is NOT TYPICALLY factored into any store P&L line, and yet a store incurs it. Depending upon the number of new hires, this invisible cost adds up quickly with very limited scalability. For those retailers that need help during back-to-school and during the winter (and for other retailers who experience more than one prolonged seasonal spike), the cost of adhering to lower labor budgets between late September and mid-November are outweighed by the cost of going through TWO seasonal hiring cycles!

There is a way out of this conundrum that both satisfies a retailer’s need to retain experienced, exceptional associates and to contain some (if not all) of the costs associated with the new hire process: keep temporary hires through both seasons.

Here’s why this makes financial sense:

Let’s assume the part-time associate who you need to let go after back-to-school makes a higher-than-national average $11 per hour and was working 15 hours per week (1 night and 1 weekend shift). That amounts to $165 per week. Multiply that amount by the 10 weeks between the seasons and it adds up to $1,650. That spend is ONE HALF the amount of money it will take you to hire (or rehire) a replacement in November. And if that associate could be individually responsible for generating a mere $11 an hour in additional sales during their 15 hours per week in those slower 10 weeks, the overall result is cost-neutral from an accounting perspective.

 

Here’s why keeping the associate on during the slower time is even more justified:

  • Customer service is improved and won’t falter during the holiday season
  • There will be little-to-no ramp-up time approaching the holidays and no opportunity for competing retailers to hire past team members
  • There are a couple of very important calendar dates between the end of September and Black Friday (Columbus Day and Veterans’ Day weekend come to mind) that necessitate increased staffing in order to capitalize on increased shopper traffic
  • What if keeping the veteran associate(s) on staff drives higher sales results? Everyone wins!

Even during the busy holiday season, your customers don’t differentiate between a newly hired seasonal associate and your experienced veterans; they still demand the highest level of service when they enter your stores. Why risk that, especially when the math proves that there isn’t any negative impact to your profit margin?

Ready to Take Your Business to the Next Level?

Click below to get started.

Start today
Brian Field Read more posts by Brian Field

Brian Field is the senior director of advisory services for ShopperTrak, where he oversees the application of ShopperTrak's proprietary solutions to retailer-specific issues across different functional areas in order to drive top and bottom line store performance. Prior to joining ShopperTrak, Brian served in roles of increasing responsibility at Chico’s FAS Inc., including as the director of corporate store operations and finance. Brian has spent nearly four decades in the industry, and his experience includes: store sales and management, training, merchandising, strategic planning and analysis for brands as diverse as David’s Bridal, Circuit City and Macy's.

Schedule a Free Demo