Five Ways to Reduce Labor Costs in Retail for 2023

January 24, 2023

Automation of in-store promotion activities help to save labor costs on retail marketing activities.

It’s no secret that retailers are facing a labor crisis, and many are finding that they are spending big on recruiting but are still struggling to retain talent. Of course, you already know that this means starting the process over again with a new hire who has to be onboarded, trained, and supervised. Ultimately, these struggles inflate labor costs, reduce the availability of resources, and cause your team to lose efficiency. The result? Less time is devoted to getting customers in the door and keeping shoppers engaged.

If you’re one of the thousands of retailers facing these same struggles, we have some tips to help you. Below are five ways to reduce labor costs in retail for 2023:

1. Streamline Scheduling

In many cases, you can reduce labor costs in retail by reevaluating your scheduling. To maximize the potential for cost savings, look at more than just how many hours you have to spend. Instead, analyze historical sales data and align your current scheduling with this analysis. Concentrate on various times of the year, but also look at your days and hours that are busiest and slowest. Of course, you already know much of this information simply from being in your store each day, but reviewing historical data may unearth subtle and nuanced trends.

If you don’t already, consider allowing shift swaps. Shift swaps don’t affect your scheduling directly, but they reduce the potential for call-outs since allowing swaps helps improve availability. If you allow shift swaps, ensure a process is in place to verify the exchange with both employees to provide coverage. This can also reduce the potential for overtime and frees up your employees to serve customers more efficiently.

Additionally, take a look at where your store utilizes talent. Retailers often find that some employees can better serve stores and customers on different shifts. The key is to do everything you can to place the right people in the right positions at the correct times. This can also reduce turnover since it will lead to satisfied employees who feel they can contribute their talents more effectively. When your store focuses on improvements that create happier employees, this results in happier customers and a better customer experience.

2. Evaluate the Effect of Transitioning Full- and Part-Time Employees

Another way to reduce labor costs in retail is to examine your full-time and part-time positions to see if it makes sense to transition roles from one to the other. Having too many full-time employees means you end up paying for labor that isn’t always needed, and it’s important to remember that full-time employees also generate the possibility of overtime. Your store’s benefits can also play a role in labor costs for full-time employees, so benefits, as they pertain to labor costs, should be factored into your analysis.

On the other hand, having too many part-time employees can also be a problem. Your store may require more part-time employees on a shift to complete tasks that can be achieved more cost-effectively with a few full-time employees. Keep in mind that part-time employees often need to engage in more shift change activities, and this has the potential to break routines and stop work in the middle of things. Fifteen minutes of downtime here and there adds up quickly when multiplied by numerous part-time employees each week.

Striking a balance here can be difficult. Employee availability, particularly when it comes to part-time staff, can be tricky to navigate while maintaining full staffing. Many part-time employees are in these positions due to obligations outside of your retail environment.

This means that evaluating a transition strategy may need to involve speaking directly with employees as well as department managers to evaluate the feasibility of making changes to employee status. Keep in mind that labor laws may also apply to your situation, so it would be a good idea to have a firm grasp of your store’s requirements before making any big changes.

3. Cross-Train Employees to Increase Efficiency

To operate efficiently, your store needs as many resources available as possible at all times. Cross-training employees can work wonders to reduce labor costs by expanding each employee’s role to allow more people to serve customers in more areas. In addition, you can eliminate labor gaps through cross-training and possibly discover new talent in the process.

This provides the additional benefit of utilizing talented team members in areas where they will thrive, resulting in increased efficiency and lower labor spend. Talent retention goes up when employees feel valued in their roles, and through cross-training, you may be able to facilitate this.

Cross-training involves a time investment, so factor the time it will take to cross-train into your plans. The payoff is worth it in the end when you have to spend less on labor, but there can be an initial labor investment required as a trade-off. During the training process, the employee undergoing training will likely be unavailable to complete other tasks, and the trainer may also be preoccupied.

This is where you can review your training strategy and materials to see if there are ways to streamline cross-training opportunities to get employees up to speed faster. One solution can involve cross-training laterally, where employees who are already familiar with a nearby department or related role can cross-train in those areas first.

4. Study Interdepartment Workflows & Communication

Communication in retail is crucial. Whether we’re talking about communication between your store and customers, vendors and your category manager, different departments with one another, or anything in between, clear communication breeds efficiency and reduces the chances for errors.

One of the biggest challenges faced by retailers is the confusion that comes from different departments working off of different calendars for promotional events. If each department creates its own calendar and has no idea what the others are doing, this results in diminished communication and wasted labor. Using automation to sync calendars for events results in greater efficiency and clearer communication. In addition, this reduces your labor costs because your retail location will need to spend less time correcting mistakes.

While you may only be able to direct some communication at your store, you can promote efficiency and reduce labor costs by focusing on interdepartmental communication strategies. If different departments aren’t able to know what the others are doing, it can be easy for complications to arise. To rectify this, take some time to study your current communication strategy between departments. Are there any bottlenecks where communication comes to a crawl? Does each department head know who to turn to for guidance in other departments if issues arise?

5. Take Advantage of Automation

Automating tasks in retail is easier than ever these days, and automation can save on labor costs. According to McKinsey, automation can save a typical retail store around 50% of its labor hours, but how you implement automation is the key. There are many ways to automate marketing tasks to attract and engage shoppers, and the best part is that you don’t have to be a tech genius to use solutions like vendor field marketing automation for in-store promotion opportunities. Automating the customer return process through software solutions, automating store workflows by analyzing customer buying patterns, and automating product placement by analyzing customer behaviors are all things that can increase efficiency and reduce labor costs over time.

For example, using an automated retail marketing solution like Demo Wizard reduces the labor required to plan and manage store demo experiences. Demo Wizard matches CPG brands with stores and handles the necessary details of each store sampling event, like inventory checks and scheduling. The added benefit of using automation as a part of your retail marketing strategy is that you get the benefits of retail marketing while reducing your labor spend.

Something else to consider is that solutions like Demo Wizard work to your advantage by increasing opportunities for store employees to work as brand ambassadors. Opportunities for employees to make an additional income that is paid by vendors can reduce the pressure of wage inflation on retailers, and this has the potential to further reduce labor costs. The fact that store demos also promote WOM marketing and customer experience means that saving on labor costs through automation is just the icing on the cake.

Bonus: Analyze Your Store’s Flow to Save on Labor

Many retailers also find that analyzing and adjusting the flow of promotions in-store can result in lower labor costs. Most retail locations have already been thoroughly researched to plan out the most effective pathways to maximize sales; however, you may have yet to account for the placement of marketing and promotional materials as they relate to floor traffic.

Marketing for retailers is all about capturing a shopper’s attention and giving them a reason to stay in your store and spend more per visit. When resources like promotional displays and sampling stations are positioned to maximize efficiency, floor traffic flows better, and employees experience fewer interruptions. In addition, your team can complete stocking more efficiently when you plan out your in-store retail marketing resources since stockers have more room to maneuver without disrupting the customer experience.

Start Saving on Labor Costs Today – Contact Demo Wizard for Your Consultation

Every retailer is looking for ways to save on labor costs, and thankfully, you have a partner in Demo Wizard. We specialize in helping our retail clients reduce labor costs through retail marketing automation, and Demo Wizard also makes it easy to attract and engage customers through store demo experiences.

Learn how our retail marketing solution can automate store demo management – schedule your personalized consultation and free demo, or call our team to learn more at (510)-859-8919.