Written by Nancy Kwon
Published in Canadian Grocer
June 20, 2012
What do QuickTrip convenience stores, Mercadona, Trader Joe’s, and
Costco all have in common?
If you guessed lowest prices, you’re
only half correct.
Not only do these retailers have the
lowest prices, but they also invest heavily in store employees, which in turn
results in better customer service than their competitors.
In an article in Time, Zeynep Ton,
a professor of operations management at MIT’s Sloan School of Management, says
that her research has shown that by underinvesting in their employees,
retailers are actually making their operations much more inefficient, and less
profitable.
With globalization, companies have moved
good paying manufacturing jobs overseas, leaving low-wage, low-skill service
jobs in retail outlets that don’t offer many benefits.
But Prof. Ton says in her research on
low-cost retailers who spent more on labour and still competed on price showed
that there are more efficiencies that result with a highly trained, and
motiviated employees.
Ton’s research showed that in a typical
supermarket that carries nearly 39,000 products, runs 100 promotions a week,
and serves 2,500 customers a day, store employees must constantly shift inventory
from storage into the right shelves to meet demand.
She writes: “In my field visits, I
consistently found that with so many products, promotions, and storage areas, a
task that ought to be simple–such as shelving toothpaste–is not. Such a
surprisingly complex operation requires something uniquely human: judgment.
Poorly paid, poorly trained, and poorly motivated employees have to monitor
which products have sold, decide what to keep on the selling floor and what to
move to and from backrooms, and remember which backrooms contain which items.”
She adds that the best information
technology in the world can’t help you if your products aren’t where they’re
supposed to be and your employees can’t find those products; you’ll only lose a
lot of sales.
Simply put, Ton’s research showed that
cutting labour costs would only help short term.
Here’s how some retailers are doing
things differently and succeeding, according to the Time article:
Full-time employees at Trader Joe’s earn
$40,000 to $60,000 a year, while Costco promotes from within (98 per cent of
store managers being promoted from within); QuickTrip meanwhile has a huge
“floater” staff to allow employees to take more vacation and sick time; and
Spanish supermarket Mercadona employees are cross trained so that everyone can
do a variety of tasks.
Not surprisingly, Ton’s study showed
that turnover in these companies is much lower than the industry average.
And with the growth of e-commerce,
investing in human resources is more important for brick-and-mortar retailers.
At a time when consumers can buy
anything, anytime online, the key differentiator for grocers could be about the
people again.
