If you have a high retail employee turnover rate, you're losing more than just a friendly cashier
It's no secret that retail employee turnover rates are traditionally high. The cost of replacing those employees can also be high, with some estimates ranging into the thousands of dollars. It's not just immediate and direct costs, either, that make employee turnover such a big deal.
Customers count on knowledgeable, courteous employees to help them in your store. When you have a high retail employee turnover rate, your store doesn't have the continuity or the knowledge that comes naturally with long-term employees. Customer service suffers immensely.
While you can train new employees in customer service techniques, there's no substitute for on-the-job learning from peers. With a high turnover rate, the institutional knowledge of long-term employees gets lost.
This might not seem like a big issue, but it is.
When you lose long-term employees, you lose a key component of your team. While some companies view retail employees as an expendable service, smart retailers like Costco know their employees are the backbone of the business.
Think about it for a minute. How much money would you lose if your entire retail staff was out for a day? What about a week? Would your store be able to function if you hired an entirely new team? Perhaps. Would it function very well? It's doubtful.
Costco is on the cutting edge of the future of retail. Customers love the low prices, sure. But Costco also understands the importance of low retail employee turnover, and they know how to create a work environment that celebrates the workers.
The average hourly salary at Costco hovers around $20, though that figure is a bit misleading. While supervisors or specialists may make more than that, the wages are closer to $12 or $13 per hour for cashier's assistants and $15 per hour for cashiers. Still, that's substantially more than a cashier makes at other major retail chains.
Like most major retailers, Costco offers health insurance, including dental care, prescription coverage, and behavioral health benefits. They also offer a 401(k), which is standard in today's corporate world.
Benefits are nice and even necessary. But if they are fairly ubiquitous, it isn't very likely that insurance and a 401(k) alone will convince employees to remain at a retail company. So how does Costco manage such low retail employee turnover rates?
Moving beyond the standard benefits
The key to financial security is a strong investment portfolio. Costco not only offers company stock as a benefit, but they also pay the commissions and fees for employee investments.
Costco offers discounts to health clubs as part of their personal health and wellness benefits program. Their health insurance program also covers routine screenings, checkups, prenatal care, and contraceptives with no copay for employees.
According to employee reviews on job search sites, Costco receives praise for making sure employees get generous shift breaks. They offer vacation, and there is ample opportunity to grow. In fact, Costco is well-known for promoting from within, which is an obvious incentive for employees to remain committed to the company.
What does this mean for you?
Not every company is in the position to offer discounted health club memberships or company stock. Very small businesses may not be able to offer a lot regarding growth. However, every business can learn a few things from Costco's low retail employee turnover rates.
The simple key to retaining employees is to understand how important they are to your business. Just because you can hire a cashier off the street for minimum wage doesn't mean you should. Yes, Costco pays a living wage, for the most part. And yes, that may initially seem to be an extra expense, but with $2.4 billion in profits in 2015, it seems clear that treating employees well isn't hurting Costco.
What can you do?
As a small or medium-sized retail business, there is still a lot you can do to work toward low turnover rates.
- Pay higher wages - When you compare a dollar or two more per hour to $3,000 or more to replace an employee, it doesn't seem like such a huge cost. In fact, a two dollar per hour increase for a full-time worker won't cost you much more over the course of a year than it would cost you to replace him or her.
- Offer profit sharing and bonuses - Just because your business isn't able to offer a stock-sharing program to employees doesn't mean you're stuck. Sharing the profits of a particularly good year or offering bonuses for excellent job performance is a good way to show employees that you value their work.
- Offer vacation time - One of the biggest complaints from hourly employees in the retail and service industry is that there is no vacation time. Time off means you don't get paid. Offering a week of vacation to your staff is going to cost you less than it will to replace them when they get burnt out because they haven't had a day off in two months.
- Offer paid sick days - The truth is, employees go to work sick all the time. Is that how you want your company represented? What do your customers think when they are rung out by a cashier with a nasty cough and a light fever?
- Say thank you - This is simple and doesn't cost a thing. Just saying thank you to your employees, and really meaning it, goes a long way in creating loyalty and goodwill.
What's in it for you?
This might sound like give, give, give. It's not. The economics are in your favor on this one, never mind the fact that it's just the right thing to do. Besides the immediate benefits inherent in reducing your hiring and training costs, there are significant long-term business benefits.
- Employees are marketers - Not in the traditional sense, of course. But consider your experience. When you go to a coffee shop or grocery store or local toy store, isn't it nice to see familiar faces? When a business retains employees, it sends a message to customers that this is a good place to spend money. Happy employees are indicative of good business practices.
- Employees are marketers, again - Your employees are in the community, on social media, and may be connected to way more people than you could imagine. What do you want them to say about your retail business?
- You'll save big - Aside from the direct costs noted previously, what else do you have to worry about when you hire new employees? When you introduce new staff, you're taking a chance. No matter how great your interviewing and screening skills are, there are times when you will hire someone who will quit three weeks later, who isn't reliable, who may steal, who may just make a lot of costly mistakes, or who ends up being a terrible fit with the team.
- Your customers will be happier - What happens with that employee we just talked about—the one who doesn't fit well with your team? Your customers will notice. And they won't be in any hurry to come back to your store. Who wants to deal with disgruntled employees?
- You'll be happier - How much time and energy could you save yourself if you had employees you could count on to take care of your business for you? The stress of owning a business is already high. Long-term, reliable employees have more than economic value. They directly impact the quality of your life.
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Have you learned anything about low retail employee turnover that you can share? Let us know in the comments.