Researchers surveying 41 retail stores found that all of them were systematically understaffed during peak hours, affecting sales and profitability.
Much research has been directed at quantifying the effect of staff levels on profits. Eliminating understaffing can result in a significant increase in sales and profits. Aligning staffing levels with changing footfall patterns can result in a 7% increase in sales and a 5.7% improvement in profitability. Over-staffing, on the other hand, has been found reduce profitability by just 2%.1
Other research found that a 1% increase in staff numbers resulted in a 0.5% increase in conversion rate.3
Avoid the Downward Spiral
Retail staff scheduling can be crucial to profitability. Basing staffing on historical sales may result in a vicious circle – a sales decrease means lower staff levels which means sales decrease further, and so on spiralling downward. Retailers looking to maximise profitability base staff levels on average store traffic or footfall for the hour (or half-hour) and day of the week.
Retailers which measure footfall can use this information to improve staff scheduling. The affect of staffing level on revenue varies greatly by store though – there isn’t a one-size-fits-all solution.
What are the two most important factors affecting Sales?
Many research papers have concluded that a customer finding a store associate to help them, and finding the product the customer wants to buy, are the two most important factors impacting sales. Logically, the number of store associates should be a tradeoff between the cost of those associates with the profit earned on the revenue they generate.
Most retailers set store labour at the same level across stores, proportionate to revenue. As the revenue impact of staffing varies by store though, this is generally not the best way maximise profits. The stores that can benefit from relatively more staff are those with high potential demand, closely located competition for that demand and experienced store managers.
Some stores set the same staff patterns across the year, taking no account of the differing shopping habits in winter and summer. In the summer, in stores that stay open late, many people shift their shopping to later in the day due to warmer weather or longer daylight hours. If stores don’t shift their staff scheduling to match traffic they risk being first over-staffed and then under-staffed as the day goes on.
Under-Staffing costs more than Over-Staffing
Over-staffing can lower profits owing to labour costs. Under-staffing can result in dissatisfied customers leaving without purchasing and even switching to competitors. As well as unhappy customers, it may mean unhappy staff leading to further decline in store performance. The negative impact of under-staffing is potentially much higher than over-staffing. Even ignoring the long-term effects of disgruntled staff and customers’ lost loyalty, over-staffing costs on average just 2% whereas under-staffing leads to a much greater drop in profitability.
Using Store Traffic to drive Staff Scheduling
Video people counting devices are now over 98% accurate and can provide a real-time count of shop visitors in intervals down to 5 minutes. Many chains of stores tend to use the people traffic data to track performance metrics like traffic growth and conversion rate. The use of the counts to improve staff planning, though, is not as common. When staffing is insufficient, bringing additional traffic does not have a high impact on sales. Indeed, beyond a point, more traffic actually reduces sales because of congestion.
Counting footfall and store traffic
Video counting technology distinguishes between incoming and outgoing shopper traffic, accurately counts people entering side-by-side, differentiates between adults and children and ignores pushchairs and shopping trolleys. Systems can also adjust to differing light levels and shadows. People have to enter and exit a counting zone to be recorded: people just crossing the threshold then immediately leaving are not included in the totals. The counts are linked to point-of-sale systems to provide conversion rate for each hour, half-hour or even every 5 minutes.
From queuing theory we know that an increase in the number of salespeople causes fewer customers to leave empty-handed and consequently results in higher sales. We also know that as store traffic increases, sales increase at a lower and lower rate plus basket value decreases. This is because, in part, the negative effects of crowding on customers and not having enough staff to satisfy customer service requirements.
All the evidence points to optimum staffing resulting in higher profitability. In today’s retail climate can stores afford to ignore their footfall data in their staffing decisions?
1Estimating the Impact of Understaffing on Sales and Profitability in Retail Stores. Vidya Mani Saravanan Kesavan, Jayashankar M. Swaminathan. Production and Operations Management, Vol 24 Issue 2.
2Setting Retail Staffing Levels: A Methodology Validated with Implementation (August 1, 2018). Marshall Fisher, Santiago Gallino and Serguei Netessine
3Effect of traffic on sales and conversion rates of retail stores O Perdikaki, S Kesavan, JM Swaminathan Manufacturing & Service Operations Management 14 (1), 145-162