Is excess space behind retail’s shrink and customer experience problems?
Many of us have had the experience of walking into a big box store where there are no employees to be found. In fact, there are plenty of reports that connect America’s excess retail square footage with the “retail apocalypse.”
Now, I’d argue that American retail is going through more of a resurrection than an apocalypse, and the 0.3 percent increase in consumer retail spending last month supports my claim. Yet, it is true that the U.S. is undeniably over-stored, with 2,360-square-feet of retail space per 100 Americans.
Paying to rent unnecessary space can definitely eat into a retailer’s profits, but that’s not the only extra expense that retailers incur when they bite off more square footage than they chew.
Large, under-staffed stores create an environment that is rife for retail theft. The National Retail Federation (NRF) reports that shoplifting causes more shrink losses than any other factor, accounting for 36.5 percent of retail’s total in 2017. However, NRF reports that when it comes to staffing loss prevention officials, “There is a sizeable gap between what is expected and what is needed.”
It’s not just a lack of LP officials that are cutting into retailers’ profits. Understaffing is another big problem that is particularly evident in big box and department stores. RetailDive reports that, “A third of customers who experienced a problem at apparel stores were not able to locate sales help, and six percent of all possible sales are lost because of lack of service.”
Yet, when retailers make budget cuts to increase margins, they often fail to look for ways to shed unnecessary rent costs. Instead, they look for budgetary wiggle room by cutting billable hours for loss prevention officials and hourly employees.
Forbes reports that, “In making management decisions about retail staffing, managers tend to focus on the immediate and known costs of reducing payroll and overlook the unknown and uncertain prospects of future gain in increased sales due to more staff in store.”
Smaller stores would mean less space to staff and less space for LP officials to watch over. Would reducing unnecessary floor space make it easier for customers to locate employees, as well as enabling LP officials to better identify and deter potential shoplifters?
- US Retail Sales Rose .3% in April, Matching Expectations – CNBC
- 2017 National Retail Security Survey – National Retail Federation
- Retailers are Under-Staffing Stores – and Losing Sales – Retail Dive
- Rapidly Changing Retail World is Closing Some Doors, Opening New Ones – The Morning Call
DISCUSSION QUESTIONS: Would reducing store sizes help retailers minimize losses due to understaffing and shoplifting? Do you see any additional benefits to smaller stores that aren’t mentioned here?