My impression is that many first-line retail employees would prefer not to spend their time regularly tracking the fortunes of the business. But Prof. Heymann might be getting at something more fundamental: Those first-line employees often are woefully inaccurate in estimating where a retailer’s product sales dollars go.
See if I’m right. Ask some of your employees this question: “For every $100 our store makes in sales, how much of that is profit after expenses?”
My colleague, hardware/home improvement retailer Art Freedman, says that the answers he gets are in the range of $30 to $50. These employees think that for every $100 sale, the business gets to keep $30 to $50 in final profit. Many employees fail to realize that the real margins are much thinner than that.
To start, they forget what’s usually the largest cost—inventory replenishment. When you sell an item, you’ll be buying more in order to replace the item on the shelf. Art says that in his business, inventory replenishment consumes about $50 of the $100 sale. And money needs to go for salaries, rent, marketing, and the rest. If you think the numbers alone will bore your staff, use charts or tell it in the form of a story.
You might not want to take Prof. Heymann’s advice to keep the bookkeeping open to all employees all the time. You might not want to implement her other advice—profit sharing. Still, occasional business literacy lessons for your staff could be quite helpful. Tell your staff where the sales dollars go. It will build their trust, motivate their job performance, and allow them to appreciate how even small mistakes, if made repeatedly, could drive you out of business, eliminating the jobs for them and their coworkers.
For your profitability: Sell Well: What Really Moves Your Shoppers
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