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How The Living Wage will drive Customer Experience & Productivity

I love the, “Budget bombshells” headline in this week’s Retail Week.

I can only imagine the consternation that the budget announcement must have caused at a senior level in some retailers as they contemplated the impact on their cost base.

The retail sector is the UK’s largest private employer with 4.3 million people earning their living through it. And it contributes £180bn to GDP, or 11.3% of our economy overall. It therefore has a major responsibility to all of its stakeholders be they shareholder, customer or employee.

But I wonder if some of the apparent buy in to the cult of customer experience from Boards in recent years hasn’t been a little tongue in cheek?

On the one hand CEOs declare their desire to put the customer at the heart of their business and yet some see it as perfectly acceptable to pay their front line colleagues the statutory minimum wage, the very lowest figure that they can get away with. These members of staff are the very people that are responsible for delivering the final stage of 86% of all customer transactions, the items bought or collected in store. More than anyone else in the whole business they have the power to set up the memories that customers carry away with them. Brand reputations and customer’s future propensity to purchase can be made or broken by them.

 

There is no doubt that driving minimum wages up from the current £6.50 for someone 21 or over to £7.20 at 25+ and on to £9.00 in 2020 has the potential to severely impact retailer’s cost base and curb low paid jobs. But the impact might be less than you imagine given that the retail sector has proportionately more employees under 24 than the rest of the economy (30% as against 13%) so the critical number of employees who are over 25 years of age and who will cost the most will be equivalently lower. What I hope we don’t see is a scramble for younger, cheaper employees at the expense of older, wiser heads. This short term approach would prove to be self-defeating at a time of opportunity for investment and innovation.

 

Raising the cost of a full time equivalent employee should make it easier to put together robust investment cases allowing retailers to adopt new technology in stores whilst delivering more skills development and training for colleagues. This has the ability to turn retail drudgery into a sparkling and challenging career with new and exciting ways of delivering cutting edge customer experience. It will drive better staff retention, skill and knowledge levels, which in turn will deliver competitive advantage.

 

We need this. A recent survey found that productivity in the UK retail sector was significantly below that in the USA, France & Germany. This could be just the spark that gets our retailers innovating.

 

Retailers need to embrace the challenge. They need to look hard at how to enhance productivity whilst delivering superior customer experiences. Customers come to retail stores to seek out personal contact, to talk to experts who know their company and products and who can help the customer make an informed decision about the purchase they hope to make. To drive sales, customers need to love the brand and colleagues need to have not only the knowledge but also the motivation to share it. But in the words of Simon Sinek, “Customers will never love your company until your employees love it first.”

 

UK retailers are way behind their rivals in Europe when it comes to connecting up the demand for face to face service in store with skilled and motivated staff. Smartphones, skills based routing, instant appointments and rescheduling demand are all means to raise productivity and sales whilst delivering better experiences.

 

The technology exists. The case studies exist. Thanks to the Chancellor the investment case has never been stronger. What are you waiting for?

 

Two reports cited:

  • The Retail Industry Statistics & Policy: House of Commons Library Briefing Paper by Chris Rhodes,      May 2015
  • Sector Skills Insights: Retail UKCES Evidence Report 53 July 2012

Also Retail Week, July 10 2015.