If you love a challenge, today’s retail environment offers them in spades: omnichannel, mobile-empowered consumers, and a prolonged period of low economic growth.
Add to that daunting list at least one more: a rising minimum wage. Already, California and New York moved to increase their state minimum wage over time to $15, joined by cities including Seattle and San Francisco, and more are expected.
The political arena is chock full of opinions on the macro-level impact of minimum wage increases. Economists are hardly united on this issue as well, with opinions running the gamut from harrowing to hopeful.
While minimum wage battles continue, retailers must assume wages for certain positions will increase and act accordingly. But how? It turns out that many of the solutions being posed by consultants and analysts, combined thoughtfully, can address not just minimum wage increases, but many of those challenges called out at the start of this post.
Shrinking Footprints: Smaller stores need fewer people. They also accommodate fewer SKUs – and that can actually boost sales. Analysis of a series of research studies published in Harvard Business Review reveals that “research now shows that there can be too much choice; when there is, consumers are less likely to buy anything at all, and if they do buy, they are less satisfied with their selection.” Rationalizing SKUs — then offering more variety via kiosks — can be the right formula to increase sales while benefitting from the lower cost of smaller staff sizes, reduced store footprints and fewer SKUs to manage.
Paring Down Processes: MIT professor Zeynep Tom urges retailers to take a close look at front-line jobs and ask the experts — those very employees — for ideas to make them more productive. “Standardizing routine processes and providing enough equipment, training, and time would help employees do their work properly. Cross-training allows employees to do useful work even when there are no customers. Empowering employees to make simple decisions for customers would reduce the time spent on small issues and deliver faster service.”
Raising the Service Bar: Many major retailers and restaurants have already begun boosting wages: Gap and Target to $10 an hour. Walmart to $10 after training.
That could be a way to get ahead of wage increases or compete for workers, but it may also be about setting a higher bar at a time when stores need to differentiate from online shopping. “You pay $7.50, you get what, in the employee’s mind, is $7.50 worth of work,” Nikki Baird of RSR Research writes in Forbes. “And the consumer goes home and shops online because it’s a better experience, with the side effect that this is where the retailer has much greater exposure to competitors than when a customer is in the store. And where all of the bad things happen that retailers complain about — price transparency, showrooming, etc.”
Paying more sends a message that the job is valued, hopefully translating into a higher work ethic and, with training and the right culture, better service.
Gap Inc. then-chairman and CEO Glenn Murphy cited this reasoning in a company statement when raising the company’s own minimum wage. “In spite of what other people may be thinking about stores and their future, we're actually looking at the role of the store incrementally increasing as more and more of these initiatives, and these ideas, and these convenient services get provided to customers…To us, this is not a political issue," Murphy said. "Our decision to invest in frontline employees will directly support our business, and is one that we expect to deliver a return many times over."
Technology: There is no denying the savings that the right technology can deliver: self-checkout, ordering kiosks, shelf tags, RFID – the list goes on and on.
Retailers seeking to increase labor efficiency while delivering a better customer service experience can take a page from restaurants. Many are turning to technologies such as robotics to take on the more routine, mundane tasks like chopping salads or rolling rice out for sushi, freeing up labor to focus on guests — and their ability to drive up incremental sales. The tech will differ, but the concept is the same.
Raising prices isn’t the only option for addressing wage increases. It won’t be easy, but a thoughtful combination of strategies that focus on overall corporate goals, not just coping with wages, can provide an opportunity for retailers to rethink their entire approach to front-line workers. Instead of paying more for the same job, retailers can create jobs that are worth paying more.