Retailers Cutting Jobs Risk Alienating Customers

One way retailers are dealing with lower consumer spending is by cutting back staff, but that is going to hurt as well as help them as they deal with the recession.

A United States Department of Labor study reported that retailers slashed 66,000 jobs in December. Firing employees isn’t always a cost savings, however. According to a Motorola study conducted in the holiday time frame, almost a quarter of consumers said they came back empty handed from a shopping trip often because of problems that suggest retailers didn’t have enough employees available to answer questions and get products on shelves. Of shoppers who didn’t purchase an item at a given store, only 43 percent returned to try again. Having an online store available may have helped some retailers. Eight percent of shoppers who left empty handed eventually bought what they wanted on the Internet, although the study didn’t specify if they purchased on the web version of the same store. Of the rest, 25 percent bought the item at another store and 20 percent didn’t buy it at all.

Dissatisfied shoppers who cited specific reasons for not making a purchase had four major gripes:

• 43 percent said they couldn’t find the item

• 34 percent reported that the item was out of stock

• 21 percent claimed that the item was too expensive

• 8 percent asserted that they needed more information to make a purchase

Motorola also found that 80 percent of surveyed shoppers planned to spend less money holiday shopping in 2008 compared with 2007, so missed sales opportunities were all the more troublesome.

Of course, Motorola is a technology company that sells products designed to make sure products are on shelves and employees are available to help consumers as much as possible, but the scarcity of clerks on the floor and at the check stands over the holidays was conspicuous at many stores and the situation is unlikely to get much better given the dismal numbers retailers just reported for December. Not only are consumers becoming more careful in their shopping, holding out for sales and specials, but they also are making fewer discretionary purchases. As most consumers know where to find the items on their grocery lists, sales lost to shopper frustration are probably discretionary and that much more painful of a loss. Technology may help in the long run, but it takes time to implement.

Every crisis is an opportunity, the saying goes. Retailers now are faced with a choice. Do they cut back on staff to muddle through the recession or do they keep employees on the sales floor and try to boost market share through improved customer satisfaction? Sometimes treated as an abstract concept, customer satisfaction could be an important store survival factor in this economy. The Motorola study might prompt retailers to consider that retaining staff might not be as costly as it initially appears.