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The cost of frontline employee turnover in the retail industry


Retail employee turnover
Cost of Frontline Employee Turnover

 

Have you ever walked into a store and felt a sense of déjà vu? Same products, and the same look, yet something feels different. Maybe the friendly store employees that you’ve seen during your store visit in the last 3-4 months are missing. Unfortunately, frontline employee turnover in the retail business is an all too common phenomenon.


The retail industry is one of the most dynamic sectors in the economy, with a massive workforce that caters to the needs of consumers. However, the industry faces a significant challenge in retaining its frontline employees. High turnover has become a widespread issue and it's affecting the industry's bottom line. The top five reasons frontline employees leave their jobs are lack of career development opportunities, not enough workplace flexibility, health and well-being concerns, compensation issues, and a lack of meaningful work.


According to McKinsey, employee turnover among first-time retail workers remains high, with estimates ranging from 60-81%. That's a challenge for corporations, who regularly have to replace more than half of their store staff each year, costing them millions of dollars.


Frequent and significant turnover of frontline employees requires companies to constantly source, recruit and train new employees. This constant churn makes it challenging for companies to implement strategic and long-term initiatives or business changes, which can lead to decreased efficiency, productivity, and success for the company.


Here are some ways in which the retail industry is adversely impacted by employee turnover:


  • Recruitment and Hiring Costs: Retailers have to spend significant amounts of money to recruit and hire new employees. This includes advertising job vacancies, screening resumes, conducting interviews, and onboarding new hires. According to a study by the Center for American Progress, it costs an average of 20% of an employee's salary to replace them. For a retailer with a high turnover rate, these costs can add up quickly.


  • Lost Productivity: When a frontline employee leaves, the remaining employees have to work harder to maintain the same level of service. This often leads to burnout and decreased productivity. Additionally, new employees take time to become fully productive, which can impact the store's overall performance. According to a study by the National Retail Federation, the loss of productivity due to turnover costs retailers $19 billion annually.


  • Training Costs: Retailers have to spend time and money to train new employees. This includes teaching them about the brand, products, and services, as well as customer service and sales skills. The training process can take several weeks, and during this time, new employees are not fully productive. According to a study by Training Magazine, the average cost of training a new retail employee is $1,886.


  • Customer Experience: Frontline employees are the face of the brand, and their interactions with customers can significantly impact the customers' experience. When a knowledgeable and experienced employee leaves, customers may have to deal with new employees who may not have the same level of expertise, leading to a negative experience. According to a survey by Salesforce, 76% of customers expect companies to understand their needs and expectations. If retailers can't deliver on this expectation, they risk losing customers and damaging their reputation.


  • Employee Morale: High employee turnover rates can negatively impact the morale of remaining employees. When they see their colleagues leaving frequently, they may feel insecure about their job security, leading to decreased job satisfaction and productivity. According to a study by Gallup, only 33% of US employees feel engaged at work. High turnover rates can further decrease this number, leading to a less productive and less satisfied workforce.


In summary, high turnover of frontline employees can interrupt a retailer's business and negatively impact its operations. It can increase training costs, reduce sales, lead to inconsistent customer service, lower employee morale, and decrease brand reputation. Retailers must address this issue by implementing strategies to retain their frontline employees, which can ultimately lead to a more stable and successful operation.


Stay tuned for our next blog, where we will discuss several strategies that retailers can deploy to minimize employee turnover.


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