Hardware Retailing

SEP 2017

Hardware Retailing magazine is the pre-eminent how-to management magazine for small business owners and managers in the home improvement retailing industry.

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HARDWARE RETAILING | September 2017 52 The Challenge One of the tools Lee Rector at Thomas Home Center True Value in McKinleyville, California, uses to keep a close watch on the overall financial health of his business is NRHA's Cost of Doing Business Study (CODB). By comparing the numbers on his financial statements to the averages for the industry, he's found several areas where he could improve his business. A few years ago, labor costs were at the top of the list. There were a couple of warning signs. His cost of labor as a percentage of sales was a few points higher than the industry average. In addition, as he took a closer look at what was happening on the salesfloor, Rector observed staffing levels were high during points in the day when customer traffic was low. But lowering labor costs is fraught with challenges. It's tempting to assume that when you cut labor, your customer service levels will drop and you'll have to cut employees. Rector did neither, and it turned out to be a win-win for both his business and his employees. The Solution To bring down labor costs, Rector says it was obvious he had to lower staffing levels. But what he needed to eliminate first was his preconceived notions about staffing in his store. "As retailers, we tend to box ourselves into the mindset that we need X number of people for our store to run, even if that means our percentage of labor to sales number is higher than it should be," he says. "What I found was that most of the time that number can be trimmed. Sometimes it is difficult to achieve, but the labor percentage on NRHA's CODB is realistic." As he tackled a problem, Rector says it was imperative that customer service and sales didn't suffer. He began cutting back staffing hours during the slower times of the day. At the same time, he made sure his schedule allowed him to help on the salesfloor if necessary. At the end of every week, he took a look at his sales and payroll numbers to see if he was getting closer to his goal, or if he still needed to make adjustments. "I spent a lot of time listening and watching on the salesfloor, looking where it might make sense to trim staff hours, looking at the sales numbers I wanted to hit and deciding how much I would allow myself to spend on labor," he says. Fortunately, trimming labor meant rearranging schedules, not reducing staff. Rector didn't have to lay off any employees to reduce his labor costs. Instead, he discovered that there were some employees who wanted to work a few less hours. Sometimes it was a college student who was happy to cut back or an older employee who was already hoping they could work one fewer day a week. Rather than make a general announcement that he was going to be cutting hours, Rector had conversations with individual employees and was able to create schedules Trim Labor Costs The plan for reducing labor costs at Thomas Home Center True Value included cross-training employees so they could be more versatile on the salesfloor. Numbers to Watch Payroll Expenses

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