Fashion & Retail Employee Staff Turnover

The results of the latest Trak and Scarlett Recruitment “Fashion and Retail Employee Staff Turnover Analysis Report” shows some disturbing facts about what’s currently happening in Australia. Employee turnover is defined as the percentage of permanent employees who leave an organisation (excluding redundancies) divided by the total number of employees. The average turnover figure for store based employees for year ending June 2011 was 50.1% which could be pulling down the bottom line of some retailers by millions.  Also of concern is that head office roles fared little better, with almost a third of employees leaving on an annual basis (32.8%). Whilst some employee turnover and the introduction of new blood, is a positive for an organisation, once it gets to these levels there are negative impacts on productivity, morale, loss of valuable technical knowledge and in the case of store staff, a direct loss of sales.

Data collected for this survey was for the period ending June 30, 2011 and took in the results of 25 of Australia’s most prominent retailers who collectively have over 1700 stores across Australia (including Department stores, Discount Department stores, and fashion, hardgoods & specialty stores).

The main motivation for employees to leave was “lack of individual recognition by the organisation” which particularly at store level, was a result of poor leadership and communication by the person they directly report to. With the tough times we’ve experienced in retail for some time now, employee numbers and rosters have been drastically reduced, creating an increased workload and pressure on those that remain. Those companies that are demanding longer shifts and chasing the sales figures too hard who don’t have a  culture of appreciation, communication and belonging, are seeing employees pulling the pin to go elsewhere. This has led to us seeing it again becoming a candidate short market so the war for good talent is hotting right up, as organisations recognise the contribution that high performing employees contribute to the bottom line.

Whilst the average store employee turnover is 50.1%, the survey shows the spread of results is huge. At the bottom end, one specialty chain with approximately 40 stores came in at a respectable 13%, whilst a 100 plus store fashion retailer was at the other end of the scale at 95%.  Because the cost to a company is rarely calculated out in real dollar terms, most organisations underestimate the significant cost. Instead the costs are hidden among a number of areas including lost sales, damage to morale, as well as the costs associated with recruitment including time to interview & shortlist, advertising & agency fees and further management time on induction & basic training.


One prominent ladies fashion chain reported that they were without a Store Manager at their Chatswood location for 4 months. If for example the store was a $2million a year store, and the result of not having a Manager to motivate and drive the team creates a dip in sales of just 13%, that equates to a shortfall in sales of over $20,000 per month. Whilst 4 months would seem extreme, difficult locations such as Sydney’s northern beaches, Canberra, and W.A. can see a store without key employees for longer periods. Added to this are the actual recruitment costs including management time to interview & shortlist, other expenses such as advertising & agency fees, costs of induction and also basic training which can add up to another $2000 - $5000 per resignation.


The costs to the business of head office positions are more difficult to measure. The amount of time needed to recruit, induct and get an employee up to maximum efficiency & productivity run into many months. In fact the survey reported an average 8.1 weeks needed just to replace, let alone the time needed for the employee to get up to speed. In terms of difficulty to replace employees, 56% of respondents believe it is more difficult than it was for the same time last year. Not surprisingly, good Merchandise Planners came in as the hardest to find, whilst Buyers, Area & Regional Managers, E-Commerce and Supply Chain executives were also mentioned. Those organisations that have a strong “people culture” and develop their management teams to practise the fundamentals such as providing  leadership, direction,  measurement, feedback, recognition, and fair reward, have a far lower employee turnover, than those that just giving it lip service.


Finally, according to a recent paper by the Australian Centre for Retail Studies (ACRS), building a sense of community is critical to developing a workplace environment in which employees engage. “Today’s ideal Manager is one who values communication and creates an environment of transparency and respect for staff” they reported.  In terms of shop floor staff, the ACRS adds that regular training and development, the opportunity to network or communicate with head office, clear career prospects and promotional opportunities along with some added flexibility in work hours were all seen as more important factors than salary level when employees decide to leave.

Retail in the USA - An Overview

While San Francisco and Chicago provide only a snapshot of the USA, our experience there and the presentations we had are worthy of discussion. Generally speaking the fashion retailers who have survived the GFC are doing really well – they’ve spent the last few years focussing on supply chain, stock levels, efficiencies and systems, really understanding working capital, margin mix and just who the customer is. Now as volumes are starting to grow again, increased profit to sales percentages see them becoming stronger and better than before.

Nordstrom for example have reduced their back stock to 1/3 of pre-GFC levels. The retail giant GAP inc with 3,100 stores is also pushing efficiency into their 1000 plus Old Navy stores. They have recently refurbished 250 stores at $800,000 each but are reducing their store size by a third (25,000 sq ft to 17,000 sq ft). Better store layout and merchandise planning have seen store sales increase with more than a million sq ft in rental savings. Speaking of refurbishments, McDonalds are spending $3BILLION (yep, billion) on converting their stores worldwide to a new design which parallels the group’s changing image from a kids concept, to where adults go to enjoy an environment that is simple, easy and effortless.

The premier department store Bloomingdales revealed their San Francisco store was doing well in cosmetics, men’s fashion and women’s accessories and while women’s apparel was still slow, they were on target to see 2011 numbers climb back to 2007 levels. But with stock levels reduced by $12million, a leaner, better run business will see profits significantly up on 2007. Interestingly the majority of their floor staff work for 100% commission. In summary this means the 275 store staff receive a “draw” of $12 per hour, but this is then deducted off the sales commissions they earn for the week. If their sales commissions don’t cover their draw, they start the next week in debit and have to “repay before they earn”. Staff who get too far in debt are moved on, and while you don’t have to repay the draw, if you were to ever rejoin the company you do! One other point of interest was the first week of the job – 40 hours of classroom training, role-playing and understanding the culture.

Michael Kors is one fashion chain that is seeing huge growth with 300 plus stores across the States as well as internationally and are about to open another 40. They view a big part of their success to be their people, culture and high levels of customer service. All store staff go through a 4 interview hiring process – 1st with immediate supervisor, 2nd with the supervisor’s boss, 3rd with both of them together and finally, a trial on the floor! Once hired, everybody quickly learns what MICHAEL really stands for: M –meeting the customer, I – interaction with customer, C – create the desire (talk about Michael himself), H – hype up the sale (multi-sell, up-sell – dress them head to toe), A – always seal the deal, E – ensure loyalty (build the relationship), L – life after the sale (follow up with a phone call and ask were they enjoying their purchase). I got to visit 4 stores while I was there and the MICHAEL approach was underway each time, however not in a tired scripted way. It was clear that each staff member believed in and embraced the brand with passion and enthusiasm.

But in terms of culture and service Apple as we all know sets the benchmark. A visit to their head office revealed how their revenue has quadrupled since 2006. Now with 324 stores across 11 countries, they plan to open an additional 40 stores per year. But for me, their $ sales per square foot was a statistic that hit home. Macys average $154, Target $294, Best Buy (consumer electronics) $711 while Apple average $4333 per square foot - and with an average store size of 6000 sq ft, that’s a lot of sales. Microsoft have obviously taken note of this and have just opened their 8th store – which we visited – which looks remarkably like an Apple store in terms of store design and layout – even the staff wear similar coloured T-shirts and encourage you to play with the products. The only real difference was the lack of customers we equate within an Apple store. When asked what was their store rollout program they responded “within 3 years, Microsoft will have a store in every location that Apple has a store!” Sounds like catch up, but it should be interesting to see when it arrives in Australia.

Retail in the USA - How technology will change customer expectations

A visit to the head office of Cisco - smack bang in the middle of Silicon Valley - revealed just how much and how fast technology has advanced and also provided us with a preview of the future. The massive impact of the first transistor radio 55 years ago seems almost forgotten. With 4 “transistors components” (today’s Intel Core 2 Duo has 291 million), it meant for the first time you could take music with you. Parents no longer controlled the radio dial and teenagers expressed their freedom via rock and roll. But as revolutionary as it was, it took 38 years for this “amazing” product to reach an audience of 50 million. Some years later it took television 15 years to reach sales of 50 million boxes. In the 1990’s the internet reached 50 million in 4 years, face book hit 50 million users in just 2 years and for Twitter it was less than 12 months.

The first video to be posted on YouTube was in April 2005.  Six years later we have 1.2billion videos viewed per day (that’s more views per week than there are people on the planet).  For retailers the critical message from all of this is the impact on how we communicate with our customers.  If you’re riding this ultrahigh speed technology wave, there are huge opportunities for multichannel retailing but for many there is the real risk of being left behind.

Have you ever wondered about who’s writing what about your business on Facebook?  Are people endorsing you to their friends, or spreading the word about a bad experience? With 9.7 million Aussie facebook profiles (46% of the population) and with an average of more than 8 hours connected per month, Australia is now number 1 in the world in terms of time spent on Facebook. In terms of the under 25 market, 1/3 of users check facebook before getting out of bed of a morning – and importantly they do it on a smart phones. It’s the emergence of smart phones rather than just on-line internet that will really change tomorrow’s shopping habits. Amazingly it was only 4 years ago that the first Apple Iphone was released and now everyone seems to have one. 2011 is the first time the world has seen more sales of smart phones than PC’s.  In fact  43% of  Australians already  have a smart phone with 48% of 16 – 29 year olds stating they shop using their mobile device (40% also use them to compare price while in store).

This 'millennial generation' (born 1977 to 1998) will soon be the number 1 consumer demographic. They spend 30% less time reading newspapers and magazines and have the highest % ownership of personal technology - including smart phones. They want to be connected, they are certainly mobile and they believe transparency equals authenticity.  As such there are 4 major implications for retailers who sell to them:

I)    Their expectation is that stores of the future must exceed the experience of internet shopping – otherwise why do it? They expect endless availability/selection (as that’s what they get on the internet). They expect your store to be easy to find (just like on Google). They expect your staff to be fast, knowledgeable and interactive when needed (just like on the internet or smart phone), and they expect to be able to take a photo and get the advice of their peers - like they do on Facebook. (Interestingly I noticed that on this year’s Westfield study tour, nearly all overseas stores now allowed us to photograph their stores with a smart phone). Finally they want to have access to all relevant information on you and your products as they equate transparency with authenticity.

II)   The most valuable real estate in future retail will be measured in centimetres and to be fully utilised will have a “six screen life”:  (1) Mobilescreens – sms, M-commerce, social media, location find, (2)Home – smart TV, (3) Computer – PC’s, E-commerce, (4) Media – social media and rich media (Internet advertisement that contains animation, audio, flashing colours, and other enhancements, (5) Public – rich media communication  and (6) Dashboard – location based with recommendations e.g. shopping malls.

III)  An omni-channel future should be created now to ensure there is a “single source of truth” spread across 3 disparate channels; In-store, E-commerce and M-commerce. The data will be about product, inventory and customer, while the functions include Merchandising, Operations, and Fulfilment. Customers want to shop anywhere, anytime, and on any device. And they prefer to shop with retailers that provide seamless, customised experiences. Those retailers that display only a small sample of product on their website will have very limited appeal.

IV)   How long before your business becomes a “Mashop”? Some retailers are already “mashing up" the virtual and physical worlds to create a new way to shop. They allow shoppers to receive the information and convenience of a web-based experience while at the same time being able to touch, feel, and see the products they want to buy. For retailers, this combination promises to increase sales through conversions at the shelf edge as customers gain more access to product information through more cross-channel sales. Creating mashop experiences will lead retailers to introduce technologies such as interactive digital displays, video assistants, social networking technologies and Wi-Fi news and alert networks that enable shoppers to remain connected with trusted people and information while they are in the store.

How you communicate with your customers continues to change at a staggering speed as technology advances. The prolific use of mobile devices (smart phones) by the millennial generation almost demands you have an omni-channel strategy to fully communicate with them. Finally, technology may save bricks and mortar as the introduction of mashops creates the theatre or instore experience needed to make your customers walk back in the door.