Results, from a recent survey conducted by Axper in North America, show that 82% of retailers, using traffic data to improve staff scheduling for better service and profit, are using the total staff hours, including non-selling hours, to determine their service ratio(service ratio is obtained by dividing the customer traffic for a given period by the staff hours for the same period).
How much service is required to maximize sales, staff productivity and customer service?
With the increasing cost of doing business nowadays, retailers need and must control their cost of sales to show some profit. In theory, if the salary cost is reduced by 1%, profit should increase by the same percentage. However, in reality, the impact of reducing labor cost on sales revenue has to be considered. For instance, if sales are down over last year, the effort of reducing salary cost is regarded as a good decision, while the salary cost % over sales might remain the same. On the other hand, if the sales are equal or superior to last year, the effort of reducing salary cost is regarded as an excellent decision for having a positive impact on profit.
Another question should be asked. According to a recent survey conducted by Time Trade of 1,000 consumers, 92% revealed that a more personalized, improved experience is the thing they want most from retailers.
Reducing the number of sales staff hours, does it have a negative impact on the sales performance on traffic (impact on conversion rate and/or average transaction)? This means we would not have capitalized fully on store traffic potential. In fact, did we negatively impact our sales revenues, the quality of our service and possibly our repeat business? As we all know, a customer will return only if he was happy with his last shopping experience, including a good customer service.
RECOMMENDATION: Schedule selling staff when it pays off.
Easy to say, but how do we define the right periods and the appropriate level for more and better customer service.
Here is a proven step-by-step approach to ensure a profitable scheduling, supported by an example:
- Quantify your hourly sales potential by counting customers.
Eg: Hourly customer traffic = 46
- Cumulate only your sales staff hours (selling hours only), excluding your non-selling hours (stock, visual, maintenance, etc.) for each weekly hour.
Eg: Sales staff hours = 2 hours
- Divide your customer count by your selling hours to obtain a service ratio.
Eg: Service ratio = 23 customers per staff hour (46 customers / 2 staff hours)
- Estimate the service time necessary, in minutes, to sell your average transaction.
Eg: Service time required = 20 minutes for $80 average transaction or 3 possible transactions per staff hour for 6 possible total transactions per hour (3 transactions X 2 staff hours).
- Use your weekly average closing ratio (conversion rate) and multiply it by your hourly customer count to obtain a potential number of transactions.
Eg: 20% x 46 customers = 9.2 potential transactions
- Divide this total number of potential transactions (9.2) by the hourly possible transactions estimated (3) to obtain the number of staff hours necessary to maximize the sales potential identified.
Eg: 9.2 / 3 = 3 service hours.
Schedule adjustment = 1 additional staff hour will be required to maximize sales and customer service based on traffic: 3 service hours identified in point 6 – 2 service hours used in point 2.
Monitor your closing ratio or conversion rate with your P.O.T. (Performance on Traffic = conversion rate X average sale) in relation to your cost of sales.
- According to the above example, the performance on traffic (P.O.T) is $1 600 dollars for every 100 customers entering the store (20% x $80). You may find it helpful to refer to read our previous article posted last June entitled « The power of the P.O.T. » which explains extensively this P.O.T. concept unique to Axper.
- Approaching staff scheduling using the steps explained above will allow any retailer to plan realistic service levels and capture additional potential sales revenues, while controlling staff productivity and salary cost, aligned with defined potential realizing both greater store and chain profit.
IMPORTANT NOTICE: To ensure the customer traffic data is reliable, retailers need a customer counting system that provides an hourly accuracy level of at least 98% or better in every store configuration and traffic condition, while eliminating all customer traffic circulating in the entrance of the store, as well as children and objects (e.g. strollers).