The pressures on retailers to cut costs are huge. One way of doing this is to reduce staff numbers. But is this cost-effective?
Retail profits depend on attracting people into the store and converting them into customers. When people visit the shop, there are many factors to converting the traffic into sales, not least the right products at the right prices. But retailers also need enough staff to ensure a good shopping experience, whether it’s by helping people find what they are looking for, providing advice on products, suggesting alternatives or giving a quick check-out.
Researchers surveying 41 retail stores found that all of them were systematically understaffed during peak hours, affecting sales and profitability. Other research found that a 1% increase in staff numbers resulted in a 0.5% increase in conversion rate.
To ensure that the staff are effectively allocated, managers need to know when are their peak shopping times and busiest footfall. A retail traffic counter shows an hourly break-down of the counts for the whole day.
Store labour is generally the second largest expense for retailers. Understanding store traffic patterns means retailers can identify key selling periods. This lets them allocate appropriate numbers of staff at busy periods, and choose to have their best staff members on the floor at these times. It also means that staff are not employed in secondary activities, such as tidying or restocking, at busy times.
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.
A people counting system will empower retailers to decide whether cutting staff levels will make them more, or less, profitable.