How to Reduce Turnover in Retail: 7 Strategies to Increase Retail Retention

Updated: August 8, 2023

a retail employee smiles in a plant store

Employee turnover is an issue that any business must regularly address. The national average for annual retail turnover is over 60%. Even if your business doesn’t have a problem with high turnover, it’s important to ensure your business is set up to continue operating well. 

High employee turnover rates are never a good sign unless you have a seasonal retail business. It might mean employees are unhappy due to their pay, future in the company, or working conditions. And the costs of having such a business lead to short-term and long-term problems. High turnover among your staff will lead to wasted time and money and a disgruntled team with low morale.

So look at these strategies to reduce employee turnover at your small business and create a happier and healthier staff.

How to Calculate Your Retail Turnover Rate

If you’re wondering exactly how bad your employee turnover rate is, first take the time to use one of these simple ways of calculating it:

Overall Retention Rate – Decide on a period to measure (a few months, a year, or even several years). Then, divide the total number of employees still at the end of the period by the total number present at the beginning. Multiply this by 100 to get the percentage figure. For instance, if you have 100 employees and 72 are still there at the end of the time period being measured, then you have a retention rate of 72. Pretty simple.

Overall Turnover Rate – Similarly, take a determined period of time to measure. Then, divide the total number of employees who have left over the given period by the total number of employees at your business. Again, multiply by 100 to get the percentage.

Calculate Average Tenure – It might also be wise to measure how long an average employee stays at your store. Add the length of each employee at your business and divide by the number of employees you have on staff.

Look at each of these and identify trends at your business to determine how big your problem is.

an infographic explaining how to 'reduce employee turnover'

Why High Employee Turnover Is So Bad for Retail Businesses

While it’s clear that employee turnover for retail (or any business) is detrimental, it’s important to remind yourself just how bad it is for business.

  • Several direct costs might come with a termination or layoff. If an employee was fired, you might need to offer severance pay or pay a portion of unemployment pay. 
  • It also costs to hire new staff. Perhaps your business pays a recruiter or other hiring agency that may charge a lot. Other costs for hiring might include software fees, recruitment advertising, and interviewing.
  • It’s also expensive to bring new staff on board. Training, orientation, and H.R. work all add up. You have to pay the new employee for their training period while also paying an existing team member to train them.
  • Additionally, you’ll need to fill the position while completing the new hiring process. This often means that some staff members will have to work overtime, which means higher pay, lower productivity, and more unhappy team members.
  • New staff members generally offer lower productivity for the first several months. This means that you’re getting less value for every dollar of pay. This might also frustrate some of your better existing staff.

High turnover rates cost you a lot. Plus, you’re losing all the time and investment you’ve put into the person who left. So now that we’ve established how important retention is among your staff let’s look at how to maximize it.

1. Weed Out Poor Candidates in the Hiring Process

Hiring the right people is the most important place to start. Even if you’re desperate to fill positions, filling them with the right people is more critical. The vacant spot might temporarily cost your business money, but the future costs of rehiring the position will far outweigh that.

For most retail businesses, it’s wise to implement some screening process before conducting interviews. Many small businesses have dozens of applicants coming all the time, and few can afford the time to interview all of them. 

On any online listings, clearly define the role that you’re hiring for. Ensure that all expectations for any prior experience and the position itself are laid out.

There’s no better strategy to reduce employee turnover than hiring better candidates for your business right from the beginning.

2. How to Reduce Turnover in Retail: Pay Competitive Salaries, Bonuses, and Commission

While you always need to ensure that your margins are adequate to keep business afloat, you should never skimp on employee pay to pad the bottom line. Remember, you only have a successful business if your employees are happy and productive. Fair pay is certainly a part of maintaining that.

Check out Glass Door if you need a ballpark pay range for specific positions. You can also speak with other small business owners or retail stores to find some comparisons.

The structure can be flexible. Many retail stores offer sales associates commission-based pay. This is common among higher-end retail sales since it protects the business from paying a higher hourly wage for unproductive salespeople. Before choosing this route, there are various ways of structuring commission in retail.

3. Offer Great Benefits to Reduce Staff Turnover

More and more businesses are offering their employees comprehensive benefits. Of course, not all retail businesses can afford this, but benefits are a great way to attract the best candidates for the job and build a successful team. The best part is that some can provide you with tax deductions or credits.

Benefits are no longer two-week vacation and mediocre health insurance. More modern benefits might include life insurance, disability pay, maternity/paternity leave, remote work, matching 401(k), and general wellness perks, like gym memberships or public transport compensation.

Millennials might request a lot, but they’re working more than ever. You won’t attract a great team of employees without offering the right benefits.

4. Make Sure the Workload Is Fair

This doesn’t mean you can’t expect your employees to work hard. Instead, make sure you’re clear with all expectations and to set consistent production across the board.

Start by setting goals to see how various individuals respond. Some people take longer for certain tasks than others and you might find that one person is faster at one thing but slower on another. Use this as a way to personalize delegation and keep people happy and feeling valued. There’s no better way of retaining employees than by making sure they feel like an important part of the team.

Healthy competition is fine as long as it doesn’t stir up resentment. Reevaluate after set periods to ensure everyone is happy and performing up to their abilities. Meetings aren’t be overdone, but they do still serve a purpose.

5. Implement Team Building Activities and a Strong Culture

It’s not just important that you get to know each of your employees well; it’s also important to build camaraderie among your staff.

Start by ensuring that all team members are on board with your store’s mission and what you care about. More retailers are focusing on community engagement. It might mean that you give back to a charitable organization with each sale, embrace a more environmentally friendly production, or involved in making your community and neighborhood a better place.

Involving everyone in team-building activities and events is a good way to get your whole team on board. Whether it’s a trip to the bowling alley or a community event, take advantage of the opportunity to grow a healthy company culture.

6. Train and Onboard Each Member Well

Getting each person started off on the right foot is critical to reducing quick turnover. A poor training program can leave new staff members with unrealistic expectations, no direction, or frustration with the direction of the business. Build a thorough training manual and program for each new staff member.

It’s important that existing team members are an integral part of the training period, too. No one can train a new employee better than someone performing well for a long time. It’s an opportunity to reward your top employees with added responsibilities and pay. Your loyal employees will enjoy sharing what they’ve learned and how they’ve found success at your store. And training new staff should come with added pay or some other perk since it saves you the time from doing so yourself.

Make the onboarding process simple and effective, too. Ensure that each new member is efficiently brought on to your team to feel welcome and cared for.

7. Increase Retention with a High Ceiling for Growth

Make sure that there is always room for each position to grow within your company. One of the most common reasons for leaving a retail business is a lack of future opportunities. Remember that paying existing staff a bit more and expanding their productivity will serve a far better use of money than using it to bring on a brand new employee.

Figure out an internal structure of promotions and raises for the first year or two for any new associate. From there, think about ways that you can continue to add responsibility and pay to your longest-tenured employees. Managerial positions or similar titles are a good place to start.

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FAQs: Reducing Employee Turnover in Retail

1. What can we do to reduce the turnover in our stores?

To reduce store turnover, start by hiring suitable candidates in the first place. Then, focus on competitive compensation, career growth, and a positive workplace culture. Regular feedback and skill development, along with work-life balance, are crucial.

2. Why is retail turnover so high?

Retail turnover is often high due to low wages, limited opportunities for career advancement, and demanding work conditions. In addition, many retail positions’ seasonal and temporary nature can contribute to a higher turnover rate. Insufficient employee engagement and job satisfaction can further exacerbate this issue.

3. What are 3 ways to prevent a high turnover rate?

Three ways to prevent a high turnover rate are:
– Competitive compensation and benefits.
– Opportunities for career advancement.
– Fostering a positive workplace culture.

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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