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Navigating Increasing Labor Costs in the Grocery Industry

August 15, 2017

Thomas Dearnley, CPA, MST
Partner

Michael C. Pelletier, MBA, MSCS
Partner, Chief Innovation Officer

In any industry, hiring and maintaining a full staff of employees can be a pricey cost of doing business. This is especially true for food retailers.

According to a study released earlier this year by the National Grocers Association, labor costs take up around 14 percent of American grocers’ average revenues. As state-mandated minimum wages across the country, including here in Massachusetts, continue to trend upward, industry leaders expect that number to continue increasing over the next several years.

These rising labor costs will likely force local grocers to make changes in order to protect their bottom lines. Of course, nobody ever wants to lay off employees or pass costs down to their customers by increasing prices.

So, what else can grocers do to cut costs?

Automate tasks, when possible

Most grocery shoppers are familiar with the self-check-out aisle, which is a good first step many grocers have taken to both modernize their stores and save a few dollars in salary along the way.

But smart grocers could potentially find other tasks to automate, from investing in machines and software to label and track inventory to signing up for inexpensive, Web-based marketing tools like MailChimp to maintain the store’s newsletter email list. Ultimately, if your business’s employees are spending time completing repetitive, simple tasks, you could be wasting money that an automated solution may save.

There are a number of automated workflow tools available for all levels of function. Some of these tools can access external data – for example if the weather report shows a blizzard on the horizon, it can trigger an order for extra stocking of shelves for affected stores. Others leverage complex internal data including staffing, onboarding, termination and standard reports. In theory, any data that is collected by a human and then shared with other humans (with little modification) can become automated, allowing your human resources to up level their activities to provide higher value to the organization. These automated workflows can also work alongside predictive analytics models. Between the two technologies, your organization finds out what your customer wants, before they even know they want it.

If and when Amazon’s proposed acquisition of Whole Foods is finalized, it will be interesting to see what, if any, changes the e-commerce giant brings to the grocery industry—especially when it comes to automation. (NOTE: We’d recommend linking back to Tom’s Amazon article here).

Invest in, and pay attention to, your consumer research

Most grocers invest in consumer tracking software to help support their marketing and advertising efforts. But most versions of that software can also be used to help grocers more efficiently staff their stores.

If a grocer can access data that shows when the store is busiest (and slowest), it can stagger employee shifts and open and close registers accordingly.

By using business intelligence tools, like Microsoft’s PowerBI, organizations are able to link disparate data sources together in a “single pane of glass” for a comprehensive view of their business, by role. As an example, the marketing department can track sales against social media activity, look at customer satisfaction against staffing and track promotions to revenue, all in one, fully automated window.

Workforce Optimization

Again, nobody wants to lay off employees. But, if grocers still need to cut costs, they may consider blending their workforce with full-time employees and part-time or seasonal workers.

Maintaining a full-time staff of managers and other higher-level positions while delegating more entry-level tasks to part-time workers can help employers trim both salary and benefits costs.

Thomas Dearnley, CPA, MST is the Partner-In-Charge of the Food & Beverage Industry Group at BlumShapiro. He can be reached at tdearnley@blumshapiro.com. Michael C. Pelletier, MBA, MSCS is a partner and Chief Innovation Officer at BlumShapiro. He can be reached at mpelletier@blumshapiro.com.

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