Why You Should Use Traffic as a Labor Driver

by | Feb 26, 2013

An apparel retail client of ours called me recently.  They had finished deploying traffic counters to their stores.  They were considering switching their primary labor driver from sales to traffic and wanted to know how other retailers were using traffic data with their workforce management systems.

The reality is that a minority of retailers have traffic counters in their stores.  Of those that do, some of them – a further minority, in my experience – use traffic to drive labor.

Yet, those retailers that use traffic with their workforce management processes, swear by the results.  These retailers are better able to align labor to customer demand.  This, in turn, leads to increased in conversion rates, larger in basket size, and improved customer service…

…but, I’m getting a little bit a head of myself.  Let’s take a steps back and understand the context of the question.

The Problems with Sales

Historically, retailers have forecasted labor by looking at anticipated sales.  This was in large part because sales data is easy to access.  It is readily available from systems such as sales audit , raw point of sale feeds, and the like. 

Also, sales is a fair indicator of labor demand.  If sales are high, more labor is required to help customers and work the cash wrap/cash lanes.  If sales are high, inventory turns faster which drive more labor to handle larger shipments and more restocking.  Conversely, if sales is low, less labor is required for selling and some non-selling activities.

Still, sales is far from a perfect labor driver.

The amount of labor required to service a customer is rarely driven by cost.  A $25 pair of faux diamond earrings and a $500 pair of genuine diamond studs have very different price points although each require the same amount of labor. 

Perhaps more importantly, when you’re staffing to sales, you’re staffing to past results which leads future results become self-fulfilling.  In other words, you’re assuming a sale occurred, but what about the sales that didn’t happen?  What if customers left the store without making a purchase because the associates was too busy to help? 

Traffic = Opportunity

Enter traffic.  Traffic represents potential.  It represents potential growth, potential sales, and potential profit for your business.  Traffic doesn’t care about past conversion rates or average basket sizes.  Traffic is new opportunity.

So, how do you take advantage of that opportunity?

You start by ensuring that you have an associate there to serve the customer, to give the customer the experience they expect and the experience that you want to deliver. 

To consistently align labor with traffic, you need to incorporate traffic into your labor forecasting process.  This is what that minority of retailers do that I mentioned at the outset of this post.  They establish traffic as a labor driver and use labor standards based on traffic.

Doing this delivers many possible benefits.  Among them are:

  1. Improved customer service.  Ultimately, Traffic is a customer service driver.  At the highest level, a better alignment of staff to customer traffic results improves the customer experience.
  2. Increased conversion rate.  Most retailers that use traffic as a labor driver believe that it results in a better conversion rate.  While retailer’s don’t make such gains public, what would a modest 1 percent increase in conversion could do to your business?
  3. Larger basket size.  Aligning staff to traffic creates a greater number of up-sell opportunities.  This translates into increased sales through larger baskets/transactions.
  4. Shorter queues.  Decrease customer wait times to ensure you have enough cash lanes open during your peak times.  This is most effectively done by scheduling to traffic.  

A Look Ahead

As you can see, scheduling to traffic has some real benefits.  Still, why do so few retailers use traffic to drive labor?  Also, what should you expect if you decide to take the plunge?  I’ll take a look at these questions in my next blog posts.

In the meantime, I’d love to hear about your experiences with traffic counters, if you’ve used traffic to drive labor, and if you have, how that’s worked for you.  Feel free to leave a comment below or e-mail me if you’d prefer to be anonymous.

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