Increased Sales Staff, Lower Wage Cost??

An international apparel chain decided to increase sales using more and better customer service. The first thing they did was install people counters to establish the exact staff to traffic ratio. Then they proceeded to improve it gradually.At a time when most retailers were cutting staff, this chain began ADDING hours, in spite of sluggish sales. In many stores, hours on Saturdays, Sundays, and other key selling periods were doubled. One store increased staff from 4 to 12 people on Friday evenings. The results were instantaneous. Sales increased; wage costs declined in spite of the additional staff hours. The program was so successful that over a three-year period, the chain’s closing ratio increased from 7% to 12%, with a corresponding increase in same store sales and a reduction in wage costs.


Customer Service as a Sales DriverMost retailers believe their stores are at least somewhat service sensitive. Many include a commitment to quality service in their mission statement. Most try to ensure that staff levels correspond to daily/hourly sales or transaction patterns.While these intentions and efforts are a good start, our research and the experience of almost 30 years working with retailers indicates that customer service can generate sales increases when more traditional methods – e.g., inventory levels, promotional activity, store renovations, etc. – have stalled. Yet service, as a sales driver, is still a relatively unknown and untried strategy.


In its January, 2001 issue highlighting customer service, Stores magazine senior editor Susan Reda defined customer service as “speed, convenience, location, quality products, competitive prices and knowledgeable sales associates”. While all these components of service are part of the total experience, the entire issue failed to mention even once the most basic requirement of retail service: availability. A knowledgeable, well-trained staff in a store full of appropriate merchandise at competitive prices will be overwhelmed, especially during peak selling periods, if the level of staff is not consistent with the level of store traffic. As most consumers will attest, all too often the available salespeople are simply not available to the majority of potential customers.


Defining Customer ServiceRetail customer service can be defined in two ways: availability and quality. Availability involves the presence of sufficient numbers of staff to handle the store’s traffic. Quality is the skill with which staff handles individual customer transactions.By far the more critical of these two is the availability of service. Quality service will improve the average sale made by knowledgeable staff. Service availability will increase the number of sales made, which generates more sales dollars than increases to the average sale.In its simplest form, service availability is defined as a ratio composed of store traffic divided by the number of sales staff available during a given period. Traffic of 100 people with a staff of 10 generates a ratio of 10:1. This means that each sales person will have an average of 10 potential customers (traffic) an hour to handle. This ratio is usually referred to as the customer per staff hour, or cu/sthr, ratio.


As the ratio increases, service availability declines. As the ratio decreases, service availability improves. When the ratio exceeds 30, there is probably very little available service on the floor no matter how highly trained and motivated the sales staff might be.


Determining Service Sensitivity


Would improved service availability during key selling periods – e.g., add staff – increase sales? There are a number of ways to determine this. One of the simplest methods, where multiple stores are involved, is to compare the cu/sthr ratio to the stores’ conversion rate or percentage of traffic sold.The following chart compares the conversion rates and cu/sthr ratios of a chain of 51

Customer Service as a Sales Driver 3 / 5 apparel stores where the average cu/sthr ratio is 7.1 and the conversion rate is 24.5%:

The second chart shows the same data for a 48-store apparel chain where the average cu/sthr ratio is 19.4 and the conversion rate is 10.5.


The first chain has spent several years working to adjust staff levels to demand. There is therefore less variation in the cu/sthr ratio from store to store than in the second chain which is only beginning to review service effectiveness.


Both chains’ chart demonstrates clearly the level of available service in the stores positively impacts that conversion rate.


The better the level of available service, the higher the conversion rate.
A second method of measuring service sensitivity, where multiple stores are not available, is to compare the cu/sthr conversion rate variables over a period of time. The following chart shows that conversion rate in a home renovation center deteriorates over a 12-week period as the availability of service progressively declines.

Using Service to Increase Sales

Once a store or chain has determined that it is service-sensitive – e.g., that service availability translates to improved conversion rate – the next step is to identify periods when improved service will be most likely to increase sales. Surprisingly, these periods are almost always the store’s highest volume selling periods.

In a recent study, the service availability during the two days of the week with the highest sales volume was the worst of the week in 85.7% of the stores tested. In other words, during the busiest, most productive times of the stores’ selling week, the lowest level of service availability occurs. The best buying customers receive the worst level of available service.

In the following example in a European store, the two highest sales, and traffic, days – Sunday and Saturday – offer the poorest levels of available service in spite of some obvious (see Sunday) attempts to provide service.

In service-sensitive stores, this situation creates the potential for significant sales increases by adjusting the level of service during these key periods/days. Depending on the degree of service improvement, service changes only to the two most important sales days can impact WEEKLY sales by 5% or more.

A proper program to improve sales via improved service usual requires more than just the addition of a few staff hours to key periods. This is a separate subject, which I’ll deal with in a future article. The purpose of the current article is to raise the possibility that, despite lower levels of store traffic, economic uncertainty, the threat of war, and other factors that have held sales increases to a minimum recently, old fashion customer service still has the demonstrated ability to provide an edge for retailers willing to explore its potential.

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