How a new retail KPI can help to keep store performance on track and retail staff motivated when footfall drops.
Retail business always has been tough – but today’s challenges for bricks-&-mortar retailers seem to reach unprecedented heights, with footfall dropping up to 20% compared to last year, even in prime locations.
Besides losing ticket sales and margin, retailers are also likely to see staff losing motivation too! Motivated staff is undoubtedly one of the most essential success factors in retail and we all know how difficult it is to motivate unmotivated sales staff! So let’s assume for now you have staff that generally is motivated, but now they’re experiencing significant footfall drops and the downturn in turnover associated with that. Staff not being busy and not able to reach their turnover and margin targets – besides working hard to make up for lost footfall – will sooner or later lose motivation and even worse, become frustrated.
Do you belong to the majority of retailers who pay their sales staff based on footfall rather than based on their real performance? I can literally hear you thinking, “…of course I don’t – what a stupid idea!”
Most Staff Motivation Systems Fail When Footfall Drops
Your store and assistant store manager may face a more complex incentive system. Besides ticket sales and gross margin, they most likely will have to pay attention to additional incentive elements such as conversion rate, UPT, ATV and ASP, staff turnover, shrink and mystery shopping results – or a combination of any of those.
Looking into incentives for regular sales staff, the majority of retailers base their incentives on ticket sales only and that is why most incentive systems fail in times of footfall drops.
Footfall is the key driver of ticket sales, unless your store is a true destination thus generating high conversion rates! But if you don’t pay special attention to your daily coaching on retail dynamics and include this into your incentive system, you’re risking overpayment of retail staff in times of high footfall and demotivating them when footfall is shrinking.
How many retailers actually forecasted double digit footfall drops? And how many adjusted their staff motivation system to cope with the situation? Maybe your staff scheduling and your employment contracts allow for an immediate adjustment of total staff hours. But this will still not be sufficient to compensate for lost margin resulting from massive footfall drops.
Footfall Utilization Index: a Helpful Retail KPI not Only in Times of Footfall Drops
Unfortunately, there is little you as a retailer can do (and this little also being very expensive) in order to increase street or mall footfall. But you still have a lot of triggers to put in place to make up for the lost footfall – IF you can manage to keep your staff motivated.
Some companies call it ‘Footfall Utilization Index’ (FUI), some ‘Variance’ and others ‘Staff Performance Indicator’ (SPI). Regardless of naming, this is how it’s been calculated:
If the FUI score is above 1.0 your retail staff managed to get more out of the actual footfall, if it is below 1.0, your staff did not manage to convert higher footfall into at least the same turnover growth; or to keep turnover drops at the same level like footfall drops.
Footfall Utilization Index (FUI) to Push Retail Performance
The FUI also helps to raise awareness amongst store managers to adjust staff hours if they are expecting an increase in footfall. This also prevents them from taking for granted that increasing footfall alone will allow them to achieve their incentive targets.
So the FUI is not only a tool for tough times, it also helps to verify the real impact of your retail staff on sales performance, when footfall is increasing. In addition, it prevents you from overpaying staff purely for footfall increases even when staff is underperforming on KPIs such as conversion rate, UPT, ATV and ASP.
When we piloted the FUI we realized that those stores generated up to twice the turnover growth. At the same time, staff cost ratio was significantly lower for the pilot stores compared to the rest of the portfolio. Thus, I suggest you run a test yourself and use this index in practice to see whether it works for you or not.
FUI: a Great Benchmark Tool for Executives
It is also a great tool to benchmark (at a very high level) performance of staff and stores which differ by:
- location quality
- store format (size, layouts, number of floors, design generation etc)
- and even channels (own retail vs. partner stores vs. online stores)
Apples vs oranges (Photo: Rick White)
The FUI evaluates each store based on its own performance, given a specific footfall dynamic in a specific location. So no discussion anymore about comparing apples with oranges! No discussion anymore with your store managers, complaining about disadvantages they are having, or think they have, compared to other stores in better locations with easier layouts!
My recommendation is to use FUI as one element of your retail staff motivation system! It will help the organisation to understand what a good job your retail staff is doing if footfall drops are substantially higher than ticket sales drops. Recognition and acknowledgement of staff performance is one of the most essential ways to keep your staff motivated. Translating this appreciation into monetary incentives is just the icing on the cake.
About the Author
Heike Blank has worked for big organisations such as VF Europe and s.Oliver but also for niche brands such as Ecko Unltd. and Zoo York. Her executive experience in establishing and managing own retail and partner stores, made her look for a retail-KPI which allows an objective comparison and evaluation of stores in multiple countries, different locations and of different formats. Please feel free to email her for further discussion on these topics. Or for more about her see here.