Study: Spending More On Workers Leads to Higher Sales

#Money

Wed, Apr 11th, 2012 10:00 by capnasty NEWS

According to a Harvard Business Review study done by MIT Professor Zeynep Ton, while stores like Costco and Trader Joe's have higher labour costs due to higher pay, training and more staff manning the floors, they are not only better places to work for but also significantly more profitable than their low-staffed competitors.

The big challenge for any retailer is to make sure that the people coming into the store actually buy stuff, and research suggests that not scrimping on payroll is crucial. In a study published at the Wharton School, Marshall Fisher, Jayanth Krishnan, and Serguei Netessine looked at detailed sales data from a retailer with more than five hundred stores, and found that every dollar in additional payroll led to somewhere between four and twenty-eight dollars in new sales. Stores that were understaffed to begin with benefitted more, stores that were close to fully staffed benefitted less, but, in all cases, spending more on workers led to higher sales. A study last year of a big apparel chain found that increasing the number of people working in stores led to a significant increase in sales at those stores.

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