News

09|17 Retail Focus


By Karl McKeever | 22.09.17

Making the cut

 

Some of you will have flown back from holiday last month having made a summer resolution to ‘make a change’ and seek out new job opportunities. Many others, though, arrived back to their retailer’s head office and stores after the summer break to discover that someone else had taken that decision for them.

While the rest of us have just begun readjusting to life back at the office, several retailers have announced that the axe will fall on thousands of jobs; 1,000 head office positions are to go at grocer Sainsbury’s, 3,000 store staff at Asda will also soon be left without a position, and meanwhile, Wilko has placed 3,900 members of its store team into redundancy consultation. They are just the latest in a growing number of retailers to embark on major restructuring programmes that, in one form or another, will have a significant impact on retail operations.

The British Retail Consortium’s (BRC) latest employment figures suggest the downward trend is set to continue. For decades, retail has been home to a rich source of employment opportunities. But by 2025, the BRC estimates that there will be nearly a million fewer retail jobs. The reason being given for the change is quickly becoming a familiar one: a desire by retailers to create simpler structures that will deliver a better shopper experience. Commenting on its most recent round of job cuts, Tesco said its move was less about cutting costs and more part of a drive to “help improve service to shoppers” by “aiming to have more colleagues on the shop floor, more often”.

It is impossible to ignore the reality: retail is not what it used to be, and progress cannot (indeed should not) be stopped.

In truth, this is a ‘veneer’ being applied to a somewhat starker reality. Competition is fierce. Sterling’s value is weak. Costs are rising (the national living wage presents very real challenges to labour-intensive industries like retail), and growth for many retailers is proving increasingly difficult to come by. In the UK, the introduction of the Living Wage and Workplace Pension reforms have come at a cost too.

Then there is the brave new age of technological automation that is quickly spreading throughout all aspects of our daily lives. Smart homes, driverless cars, self-scan checkouts, and mobile pay in store – it is not surprising that retailers are currently asking serious questions about how they and their stores are resourced.

It is impossible to ignore the reality: retail is not what it used to be, and progress cannot (indeed should not) be stopped. As a result, many of the established operating models must quickly adapt to keep pace with change.

For all of the focus placed on what the Store of the Future will look like in physical terms (technology, design, its ‘reason for being’), what it looks like operationally is arguably the more interesting and pertinent question right now. Put simply, stores do not need as many staff as they once did.

The unavoidable truth is this: being able to work smarter invariably requires a fundamental change in behaviour.

So what are the operational realities of this new dawn?

The BRC has talked about a future of “fewer but more productive jobs”. Yet surely, shouldn’t store teams working productively be a given? Even those retailers without plans for reducing headcount should be ensuring that every store team member, in every store, is working as productively as possible. For me, there remains too little discussion focused on how this is (or rather, why this isn’t) routinely achieved within our industry. And that is a mistake.

Sainsbury’s decision to draft in consultant McKinsey is part of a stated three-year plan by the retailer to deliver cost savings of £500 million. I think most would agree that, arguably, there is too much operational complexity within many retailers. The result can often have a stifling, suffocating effect on the business, especially when it comes to decision-making. Simply reducing headcount, however, doesn’t equal greater efficiency – just a lower cost-base, as well as the potential threat of a demoralised workforce.

Visual operations and maintaining retail standards already have to fight to avoid taking a backseat to other instore priorities. Too often, these are viewed as a ‘nice to do’ rather than an operational imperative. Too often, when store teams are tasked with activating visual programmes instore, there is a lack of time allocated within their working day to doing these and doing them well.

The unavoidable truth is this: being able to work smarter invariably requires a fundamental change in behaviour. And this is especially true at store level. As a result, there will be a great deal of hard work ahead before the benefits of restructuring starts to be seen.

Delivering improvements in productivity will require some of the savings that retailers achieve through reducing staff numbers to be reinvested into learning and development programmes. You simply can’t strip out layers of store teams without providing those that remain with the knowledge, skills and tools needed to help them perform more effectively and efficiently. Failure to do so could result in retailers suffering from a further (this time, unplanned) exodus of talent from their business.

If store teams are asked to perform a different role moving forward, responsibilities need to be properly defined and communicated.

Retailers have a responsibility to ensure that store teams tasked with seeing through the transformation are full of inspiration, motivated and, most importantly, capable of delivering on the vision – not only in terms of customer service, but also in respect of performing the daily routine tasks that go towards creating the kind of ‘improved’ instore environment that the future promises and shoppers are demanding.

Retail history reminds us of the many cost-cutting, slide-ruling measures that have previously gone before. Retailers should not forget the ‘unseen’ impact of reducing staff numbers on the shop floor – so much of what makes an effective retail business is all about the people who work there. Retailers who ignore the ‘fundamentals’ of what make the ‘bricks’ operations different to their ‘clicks’ transactions will do so at their peril: people to deliver well-planned, well-stocked and great looking stores, and the much-valued service that keep shoppers coming back for more. Cutting costs is quick. Rebuilding performance takes considerably longer and, ultimately, comes at its own cost.

This article was originally published by Retail Focus, September 2017.

Related

Winning Teams

What is the importance of a well structured, well-organised team?

Stores of the Future 2.0

Leading industry thinkers discuss 'Store of the Future' concepts in a new retail podcast.
View All

Featured Articles