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No matter how you slice it in the retail business, payroll is one of the most important parts of overhead, and overhead is one of the most crucial things you have to fight to maintain your profit margins. That was true then, and it is still true today. - Sam Walton, Walmart Founder (Walton& Huey, 1993)
In the highly competitive retail environment, many brick-and-mortar (B&M) retailers consider in-store experience critical to converting incoming traffic into sales and future visits. Superior in-store experience requires having not only inventory in place but also a skilled store workforce to ensure an efficient and pleasant visit for the customers. The retail workforce is a critical component to the overall success of the traditional B&M retailer’s goals and objectives. Increased competition from online shopping threatens the very existence of many traditional retailers (i.e., traditional B&M stores). U.S. Department of Commerce quarterly eCommerce figures show that consumers spent $601.75 billion online with U.S. merchants in 2019, up 14.9% from $523.64 billion the prior year (Young, 2020). Nearly 8,000 retail U.S. stores closed in 2017, according to investment banking firm UBS (Stock sector, 2018). However, traditional retail stores still hold a key advantage over online competitors: the ability to provide a memorable in-store shopping experience and fantastic service levels on the shop floor. Hence, retailers must enhance the customer in-store experience to better compete with online retail.
For traditional B&M retailers, conventional methods of competing through convenience, assortment, and pricing are largely ineffective against online retailers who outperform them in these dimensions. In this scenario, retailers should use service as a way to distinguish themselves from online retailers. A positive customer experience has a significant impact on customer retention and purchase behavior (Bapat & Thanigan, 2016). Hence, retail stores require better control of the in-store environment with effective management of the retail workforce. The presenceof frontline store associates and human interaction can play a pivotal role when competing against online retailers (Rajamma et al., 2007). Research by Salesforce shows that 75% of consumers say it’s absolutely critical or very important to interact with a salesperson who is available when needed during a shopping trip (Salesforce, 2019).
The role of frontline store employees is, more than ever, crucial to the success of retailers (Ifie, 2014). However, workforce-related expenses (i.e., compensation and benefits costs) account for a significant portion of a retail stores’ operating expense (Ton, 2009). Labor is the biggest component of selling, general, and administrative (SG&A) expenses for 10 of the largest U.S. grocers and estimated at 14% of sales on average (L.E.K. Consulting, 2017). Therefore, retailers need to balance the need to increase sales by deploying more workforces for providing better services to customers against the need to control retail workforce expenses that can increase commensurately.
Research works in this direction and discusses the contribution of the retail workforce in enhancing service delivery and profitability of retailers. It also explores the traditional retail workforce sizing approach and highlights its limitations in determining optimal retail workforce size. Hence, such a sizing approach leads to either undersizing or oversizing of the retail workforce. Prior research suggests that both undersizing as well as oversizing of workforce results in sub-optimal retail store performance (Madhani, 2021c). . The following research questions are being investigated:
This research is unique in that it shed light on both dimensions of retail store performance i.e., service delivery and optimal size of the retail workforce to facilitate it. The research underscores a crucial role of retail store employees in enhancing customer satisfaction and store experience and develops various frameworks for synthesizing value creation processes for retailers.