Woman in boutique taking inventory

Retailers Investing in Employees will Profit

Although the economy is starting to bounce back, wages and benefits are still low when it comes to many low-skill service jobs, such as employees of retail outlets. Some experts, however, think viewing retail labor as something to be cut may be backward, according to a story in Time.

Woman in boutique taking inventory

By underinvesting in employees, retailers are making their operations much more inefficient, which leads to lower profits, said Zeynep Ton, a professor of operations management at MIT’s Sloan School of Management, who has been researching the topic for the past 10 years.

“Highly successful retail chains — such as QuickTrip convenience stores, Mercadona and Trader Joe’s supermarkets, and Costco wholesale clubs — not only invest heavily in store employees, but also have the lowest prices in their industries, solid financial performance, and better customer service than their competitors,” she wrote in a paper published in the Harvard Business Review.

Some in the industry were skeptical and told Ton that investing in employees only makes sense for retailers who differentiate with products or services, not for those in the low-cost sectors. Ton’s research proves otherwise.

The reason? Retailers who invested in employees and had low prices were able to do so because they were able to save in areas by having a “highly trained, highly motivated workforce,” Ton said in the story.

 

[via Retail Customer Experience]

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