Retail Management Case Study: 3 Keys to Improving Your Payroll Efficiency
Surveys show that the retail industry consistently ranks below the national average for compensation and benefits. We know that some of what drives this is that retailers are at the end of the supply chain and as such have to absorb the entire cost of the product plus cover their own business costs.
But in our retail consulting practice we have also found that many retail management teams try to use payroll as the first and best lever to save money on the expense line. The result is that wages are kept low, incentives are unattainable and store coverage is thin. Instead, we often encourage our clients to consider changing their outlook from payroll as an expense to one of investment.
Such was the case with a 50-store specialty retailer that we were working with not too long ago. Let’s take a look at how we helped them improve their return on investment from payroll.
Step # 1 – Pay More: Surveys and studies have shown that the top 20% of sales representatives are responsible for up to 80% of a retailer’s sales and profits. Yet, many retailers choose to attract and hire low performing or inexperienced sales representatives instead of hiring the best.
Contrary to what you may think, it does not take a lot to attract top talent. Your base compensation plan and commission plan only needs to be marginally better than your competition. You also can provide additional compensation through low cost online retail training courses, contest incentives and the ability to earn time off through attaining sales goals.
In this case we found that the retailer had failed to increase base hourly rates in over three years. In fact, they had reduced the base rate to the mandated minimum resulting in an increase in annual employee turnover to over 150%!! Once we laid out the business case for the owners the decision to modify compensation was simple.
Step #2 – Expect More:
Now that you have hired experienced and goal oriented retail sales representatives you have the opportunity to expect them to achieve at a higher rate. In this case, the newly hired team members had already proven their ability to achieve at a high level at their previous jobs so during the hiring and new employee orientation process we worked with them on establishing aggressive sales targets.
Additionally we were able to refocus the retail store managers’ activities from putting out fires and training new sales representatives on how to do the basics of their job to sales management. Their daily activities now focused on goal setting, product training, monitoring results and helping their team members hit stretch goals.
Step #3 – Get More: Through making some simple changes to their recruiting, hiring, training, and payroll practices we were able to help this retailer to drive revenues by over 20% and operating margin by over 25%! Additionally, employee turnover has decreased by 40% on an annualized basis and payroll as a percentage of sales dropped by almost 20% as well.
Do you want to learn more about how you can improve your retail store operations? Contact us for a free one-hour consultation.
- David Goodwin is the Principal of the Retail Advocacy Group. As a 30 year veteran of the retail industry he has directed the activities of hundreds of retail locations and thousands of retail sales representatives and store managers. RAG offers consulting services, retail sales training and management training programs. You can learn more at www.retailertrainingservices.com.