Reduce Labor Costs in Retail: 5 Simple Tips


Updated: February 15, 2023

two baristas stand behind a counter at a coffee shop

Having excellent staff is worth every penny…most of the time. But with rising minimum wages, it’s important to not let too much time slip between the cracks. Optimizing your floor staff hours, whether you have a retail store, coffee shop, bakery, or quick-service restaurant is an important budget goal. Plus, your employees will appreciate it – no one likes idly standing around waiting to be cut.

With an employee management system integrated into your POS system, your labor costs are easy to calculate. All data is taken directly from your POS and automatically calculated into understandable numbers. But how can you reduce labor costs in retail? Here are 5 things to keep in mind.

5 Ways to Effectively Reduce Labor Costs in Retail

  1. Pay Attention to Your Scheduling
  2. Organize All Tasks in the Store
  3. Lower Employee Turnover Rates
  4. Pay Attention to Historical Sales Trends
  5. Keep Scheduling Organized and Automated

1. Pay Attention to Your Scheduling

Establishing a long-term set schedule is convenient and easy to manage, but it’s not always great for keeping labor costs at the right level. Most businesses have ebbs and flows in their sales throughout the month or season. Track historical sales data with your POS system to better anticipate in-store traffic. Working to design a flexible schedule might add a few more responsibilities to your management, but it will allow for lower labor costs.

It will also make your staff more content. Most retail employees enjoy having a flexible schedule and will prize an extra day off or an additional shift here and there. You can also use this as an opportunity to play to individual strengths as well. For example, some staff might have a strong preference to work the busiest shifts, while others may thrive in quieter environments where they get to have more one-on-one time with customers.

Finally, avoid overtime at all costs. Overtime pay will quickly erase saved labor costs in other areas.

2. Organize All Tasks in the Store

Just like any other aspect of running your business, organization is key. Keeping a detailed list of responsibilities throughout the store is a great way to get a better idea of how long certain things take, who does them well, and how they can each be best completed. You’ll know when you need more staff and when you can afford to run with a lighter group. This will also give you instant feedback on both employee preference and performance for certain tasks.  Here are a few things to keep in mind when organizing your store tasks:

  • Make tasks simple and achievable
  • Identify the priority level
  • Assign them clearly by person/role
  • Keep progress visible
  • Highlight completion

There are task management apps available for retailers that can make this more organized and rewarding.

It’s also helpful to cross-train your staff. Most people enjoy learning new skills and becoming a more valued member of the team. If your staff is capable of performing various tasks you will require fewer people on the floor (especially during slow times), and will always have backup if an employee calls out or quits.

a smiling retail employee puts their apron on inside a flower shop

3. Lower Employee Turnover Rates

Hiring new staff is expensive. It often requires interview costs, job fair fees, drug screenings, background checks, and, for more senior positions,  signing bonuses and relocation expenses.

You also have to pay them to train, which is adding another body to the service or retail floor and your labor costs. This can lead to other indirect costs, such as the lost revenue from being understaffed during the interim period.

Plus, high turnover rates look bad. They’re never a sign of a healthy business. Keep your staff happy by providing a great workplace environment and a path to career advancement.

As we mentioned earlier, it might be easier to keep a set schedule throughout the year, but it will never be optimal. Most retailers, for instance, are much busier during the holiday season. Many big-box retailers even bring on temporary staff for this season. For many of these businesses, this is drastically different during July and August.

Use your point of sale system to generate detailed sales reports from past months and years so you can better anticipate how busy your business will be. Of course, analyzing sales and overall performance is, by itself, an important maintenance operation for any small business.

Depending on your business, it might also be worthwhile to adjust your scheduling based on the weather. A quick-service restaurant in an amusement park doesn’t typically need a full staff on a rainy day. This may seem a bit obvious, but staying alert and taking action early will keep staff happy and the few hours of extra pay saved each time will add up to a lot a the end of the year.

5. Keep Scheduling Organized and Automated

Just like so many other retail operations (inventory, loyalty programs, ordering, etc.), your schedule can be automated. Gone are the days of printing the schedule on a tiny Excel spreadsheet and magneting it to the walk-in fridge.

Invest in one of many affordable scheduling apps. Among many other things, these tools allow staff to switch shifts and request time off. They also  let you send notifications and schedule team meetings. They keep things simple and minimize confusion and mistakes.

Reduce Labor Costs in Retail with KORONA POS

As we mentioned in the blog, your labor costs can be managed through your retail POS or bakery point of sale. And our great support team is here to show you exactly how. Just click the link below and get signed up with a free trial so you can see all that KORONA has to offer!

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Frequently Asked Questions About Reducing Labor Costs In Retail

How can labor costs be reduced?

There are many small ways to cut back on labor costs. Schedule staff members sparingly during slower times of the day and week; prioritize and delegate tasks and procedures; reduce staff turnover; look at historical sales trends to identify your busiest and slowest times of year.

What can make labor costs go up?

The most obvious way that labor cost can increase is by mismanaging the schedule. If you keep your store too heavily staffed, you’re likely to have people standing around and getting paid without needing to be there. Overstaffing can also lead to overtime pay, increasing your labor costs even more.

How can efficient scheduling reduce labor costs for small businesses?

You can first manage slow-moving goods by paying attention to previous years’ sales reports to avoid over-ordering. However, once you do have items that are slow moving you can set up promotions, discounts, and sales to encourage customers to buy them. Think of adding these items to flash sales, clearance sections, and bundles.

How can you reduce labor costs without cutting staff hours?

Increase the efficiency of your business by streamlining operations and implementing procedures and uniform policies. These help delegate tasks to the right people and increase productivity among the team.

How can I lower payroll costs?

There are many ways to lower payroll, but for small businesses that pay staff at hourly rates the easiest way to lower payroll is by reducing hours during slower times of the day. Use your sales reporting in your POS system to identify time frames where you can reduce your staffing.

About the Author

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Michael Chalberg

Michael has long focused his writing on the world of retail and small businesses. He''s been a part of the KORONA POS team since 2018 and loves helping entrepreneurs find ways to adapt and succeed. In his spare time, you'll likely find him hiking somewhere in the Southwest.

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