The retail experience has shifted massively during the past few years, particularly as eCommerce and BOPIS (buy online, pick up in store) options gained unprecedented traction with consumers. Despite these moves to digital, in-store labor remains the largest single expense for most traditional retailers, and those costs are only going up. Wages are increasing, scheduling laws are getting more complex, tasks at the store level are changing, and workers have more choices than ever in terms of where and when they work.

With all this new complexity, it is more important than ever that retailers maximize the efficiency of their entire labor management process. These days, maximizing efficiency is synonymous with adopting new technology, and it’s true that new technology solutions can mitigate rising labor costs. However, when jumping into new technology solutions, many retailers fail to do the hard work of first refining their core labor model — particularly best practices, SOPs and labor standards. As a result, they fail to achieve the expected advances and cost savings from promising digital solutions. 

Technology Precursors: Best Practices, SOPs and Labor Standards

A few retailers (Amazon and Kroger, for example) have developed highly sophisticated, data-driven labor models that sync with best-in-class suites of digital labor management tools, but most are behind the curve. Although they may feel pressure to quickly onboard new digital tools to keep up, these retailers need to build their technology solutions on a strong foundation of best practices, standard operating procedures (SOPs) and engineered labor standards to achieve lean yet effective operations in the new retail landscape.                                                                                                                             

Best practices and SOPs are the foundation of any advanced workforce management structure. Without clear and detailed best practices, it is impossible to capture the time associated with each task, and it’s difficult to train and scale tasks across stores and regions. Yet even today, simple processes often vary from store to store, and these variances seriously hamper digital transformations in retail.

As online business grows, in-store tasks will continue to change to support the new shopping patterns. For instance, many retailers now have BOPIS procedures as a part of their regular tasks. It is critical that these procedures are updated clearly and concisely to reflect the latest processes.

Once store procedures are specified, retailers can apply motion-based labor standards to each step of a task. Labor standards define the exact engineered time it takes to perform work at a store level. While it might be tempting to take a shortcut and only measure certain tasks, it is extremely important that all work is measured in a consistent and accurate way. The process of creating or updating labor standards will inevitably surface potential improvements to processes that have become redundant or outdated.

Labor Models Enable Digital Advances in Retail

With a solid labor model foundation in place, retailers are much better prepared to achieve the full potential of digitalization. Some of the gains will be customer-facing, such as improved in-store digital customer experiences like self-checkout. Other benefits will impact managers and store associates, like AI-driven labor forecasting and app-based scheduling tools. The benefits of labor model-driven digital transformation include:

• Efficient automation: As more tasks become automated, up-to-date labor standards will be crucial to creating the most efficient mix of manual and automated work. When each micro-task is clearly documented, it becomes much easier to adapt as new automated solutions come online, and to measure in real time whether the new processes capture the expected cost savings.
• Accurate labor demand forecasts: The simple sales-based in-store labor allocation model has become obsolete. Particularly as inflation surged past 5%, sales-based forecasting proved inaccurate at both the chain and store level. Retailers instead need to enable a bottoms-up approach that measures the actual forecasted work at the store level. Coupling robust best practices with labor standards allows retailers to accurately forecast work based on variable labor drivers like customer count, units shipped and units scanned. It also allows store managers to spend less time editing forecasts and more time on the floor helping their teams and serving customers.
• Seamless scheduling: As customers make fewer trips to brick-and-mortar stores, retailers need to maximize each in-person encounter with outstanding customer service. Modern scheduling tools can identify which employees are qualified and available for specific tasks at the store level and automatically schedule them to the optimal shifts. Mobile apps, meanwhile, can empower associates to adjust their schedules, communicate with their team and access training modules. But to be efficient, these scheduling tools need to be linked to accurate labor forecasts (see above) based on up-to-date labor standards. Retailers can then leverage scheduling performance data to ensure that actual store schedules adhere to forecasts.
• Explainable workforce management: Engineered labor standards give workforce management teams more credibility as they allocate labor hours to individual stores. Rather than leave managers wondering why their store has fewer hours than another similar store, retailers can leverage labor standards to logically explain those decisions, particularly if they leverage a technology platform that gives store managers real-time transparency into the labor allocation process.

Beyond improving customer and employee experience, responding to the current moment by focusing on labor models can unleash significant cost savings for retailers. Recently, a Wipro grocery retail client created $15 million in labor savings by eliminating redundant tasks from their labor model, further streamlining store processes​ and optimizing workflows for receiving and stocking deliveries​. A retail pharmacy client, meanwhile, developed scheduling templates for pharmacists that optimized scheduling based on daily/weekly demand​, while also improving employee engagement with a more flexible and technology-driven approach. In the process, they saved more than $10 million in overtime expenses.

Why Now?

Disconnected and ad-hoc labor management strategies may have sufficed to navigate recent retail disruptions, but those strategies will not be enough to stay competitive in the coming decade. To stay competitive, retailers will need to pair new digital-first labor management approaches with carefully calibrated labor models. Market leaders that build strong foundations for digitalization will increasingly be defined by efficient, data-driven labor management strategies that translate into seamless experiences for managers, associates, customers and HR teams alike. 

Faraz Ghani
Partner, Retail Consulting

With more than 16 years of global consulting experience, Faraz helps leading retailers assess, design, and implement initiatives to enhance their overall in-store and integrated omni-channel performance, as well as improve customer and associate experience.

Joe Henshaw
Retail Managing Consultant

Joe has 25 years of experience in retail operations and workforce management with some of the world’s largest retailers. Throughout his career he has managed system upgrades, labor model updates and process improvement projects that have delivered strong ROI for a variety of clients.