A Balancing Act

Last week’s announcement by Tesco of flat sales and profit growth highlighted just how fine a balancing act it is for major retailers and malls to balance staffing levels for service, with the need for profit.

I walked through the Mall of America in Minnesota a couple of weeks ago as a tornado whipped through the American Airlines home airport of Dallas Fort Worth and damaged almost 200 planes. One was mine, so I had to stay an extra night in Cincinnati. Fortunately, my hotel was within walking distance of what was, until a refurbishment at Canada’s West Edmonton Mall, the largest shopping mall in the world.

When I lived in Canada I visited “West Ed Mall”, as the company I worked for, Royal Doulton, had three stores there. It needed three stores because the mall is so large you weren’t sure shoppers could find just one store. It is huge.

Walking around the Mall of America, I was struck by just how impressive the retailing space and theme park was, but also by how soulless it was. One of the best ways to see if footfall is being converted to sales in a mall is to look for branded shopping bags. While many shoppers were enjoying walking and seeing much larger versions of their favourite stores – Apple, Hollister, Lego – very few were shopping or carrying their purchases.

And here’s why.

When an area becomes so large that all a retailer can do is bulk up on displays, or show off a much bigger footprint of a normal store, the retailing space becomes lonely. I often talk about good retailing space being light and airy. That’s very different to cavernous and soulless.

So what’s that got to do with Tesco’s latest growth and profit plateau in the UK?

Well, Alistair Osborne, writing in Britain’s The Telegraph, got under the numbers of Tesco’s staffing levels versus its competitors. Basically a shopper will see 4.8 Tesco retail associates for every 1,000 sq ft of store, versus 5.1 at Sainsburys and 6.8 at Morrisons. Interestingly, six years ago, Tesco had 6.3 retail associates per 1,000 sq ft, but has followed a planned reduction strategy in order to lower costs and boost profit.

Shoppers like seeing people in stores and restaurants, whether they work there or are visiting too. So Tesco are re-investing in 8,000 more store associates to keep the energy on the store at a level where shoppers feel comfortable.

Sales and profits will increase if 8,000 hits the sweet spot of balancing service and shopping experience with cost.

Time will tell.

In his role as CEO of CROSSMARK, Kevin Moore looks at the world of retailing from grocery to pharmacy, bottle shops to car dealers, corner store to department stores. In this insightful blog, Kevin covers retail news, ideas, companies and emerging opportunities in Australia, NZ, the US and Europe. His international career in sales and marketing has seen him responsible for business in over 40 countries, which has earned him grey hair and a wealth of expertise in international retailers and brands.

CROSSMARK Asia Pacific is Australasia’s largest provider of retail marketing services, consulting to and servicing some of Australasia’s biggest retailers and manufacturers.