How retailers can fight inflation with kindness
10 min read
Cutting retail jobs may be an effective solution for reducing costs, but our retail expert shares why there's still some room for kindness.
Inflation is on the up again, thanks to a combination of post covid recovery and the uncertainty of an escalating conflict in Ukraine.
As the world emerges from covid isolation, increased consumer demand is leading to shortages of goods and gaps on retailers’ shelves. This is compounded by the effects of higher energy and fuel costs that started to rise even before the war. In Europe alone, energy is seeing an unprecedented 32% annual rate rise (Eurostat).
When the average consumer tightens their belt and focuses more on the essentials, this does of course have an impact on retailer revenues. But retailers cannot easily respond as they would like, by lowering consumer prices to maintain volumes - not when the vectors affecting availability and cost are pointing in the wrong direction.
There is only so much a retailer can do about global supply problems or escalating energy prices, but retailers are a canny breed and they will find ways to navigate through this perfect storm.
How? By consolidating and cost-cutting. It’s a never-ending quest as retail businesses strive to operate smarter and leaner to remain efficient and maintain an edge over their competitors. At the same time, they must remain relevant for their shoppers, as well as growth for their shareholders. Any retailer that can achieve such a challenging mix stands a chance of surviving through these turbulent times.
None of this is new. It’s what retailers do and it’s a normal ongoing process. But these are not normal times with inflation at higher levels than we have seen in decades.
Facing such cost pressures, it’s therefore not unusual for retailers to seek to cut costs by reducing headcount. It is often seen as the most immediate and effective solution. During the pandemic in 2020, Sainsbury’s, unfortunately, had to cut 3,500 jobs and another 2,000 are set to go before the summer amidst rising inflation. Sainsbury’s is not alone, other retailers too will be facing the same stark choices.
But retail employees are consumers too and subject to the same cost of living pressures as anyone else. Anyone struggling with the challenges of higher energy bills, and a general rise in the cost of everyday essentials, forcing them to decide whether to ‘heat or eat’, would be devastated by the catastrophic loss of their source of income on top.
In these tough beyond-austere times the kinder thing to do would be to abandon all thoughts of letting your employees go, and instead give them a pay rise. In one step removing the anxiety of unemployment and at the same time cushioning the blow of escalating prices.
It may sound counterintuitive and absurdly altruistic, but it’s not unprecedented to pay staff more in times of difficulty and uncertainty.
During the pandemic, Tesco recognised the challenges their people faced with anxiety levels rising due to worries about infection and the increasing incidences of violence against store staff. At the same time, longer hours and heavier workloads added to their stress. So Tesco implemented a 10% pay rise for their workers.
A different situation than the one we are facing now, that’s true. And whilst retailers are not in the business of providing social welfare, they do need to retain their staff, maintain morale, and encourage productivity. And to quote Paul Warner PhD: “Happy employees equal happy customers. It’s a linear relationship.”
So, the controversial premise is this: ‘be kinder to your staff and pay them more. Increase their benefits and their sense of security. If the retailer’s bottom line is hurting, imagine how the general assistant on the shop floor or the warehouse operative in central DC is doing? And what impact do their worries have on their productivity and willingness to give service with a smile?
Apart from the financial incentive, there could also be operational ones. Investing in systems and solutions that enable your people to do their work more easily, in less time, and with greater precision will bolster their job satisfaction and demonstrate to them that they are appreciated by the organisation.
In other words, staff investment can also come from updated or new technology and operational systems. To realise this sooner rather than later, is it possible to accelerate the adoption of automated systems that are already in the pipeline? Can the organisation sign off on that workflow system that’s been sitting on a director’s desk for a few months? And if there is no alternative but to let some people go, how can the workers remaining be supported? What support can be provided to help them cope with increased workloads and the ever-greater demand for more efficiency and quicker time to market?
Paying staff more sounds counterintuitive to making savings. But the talent of a workforce can mean everything to an organisation. So, in these inflationary times, why not show your people you care and give them more reasons to commit their loyalty to your organisation.
In fact, despite having to let staff go, Sainsbury’s has recently announced an increase in the basic hourly rate for all employees from £9.50 to £10 an hour. According to Simon Roberts, Chief Executive Officer, this recognises “how much we value the brilliant job they do for our customers every day”.
Tesco has made a similar announcement increasing the hourly rate for their shop and warehouse staff, and drivers. Jason Tarry, Tesco UK & ROI CEO acknowledges that these investments in colleagues are central to making Tesco “…a great place to work for all. A place that attracts and retains the best talent in the industry.”
Because there are sound practical financial reasons to hold onto your talented people. With the time and resources invested in developing a team member or a department, it is better to do it once and well - rather than retrain numerous people on the same thing countless times. This could save you money and lead to greater productivity in the long run.
Increasingly, technology investment is an activity that astute retailers are proactively budgeting for. Shoring up financially, operationally, and technologically for potential crises should be standard practice in retail, and as we all know from recent bitter experiences, there is always another crisis on the horizon.
How and where a retailer chooses to drive its efficiencies or invest further in technology is a conversation they should have with their solutions provider. But retailers should always keep in mind how this will affect their people. How can a perfect storm be turned into a perfect opportunity to support talented employees to do their jobs more effectively, with greater satisfaction, and a little extra cash in their pockets for those stormy days ahead?
So, when you face the challenge of having to cut costs, instead of just laying off staff, consider the opportunities and ask yourself the question:
“How can we pay our valued staff more, whilst still optimising efficiency and costs?”