DECEMBER 2023retailtechinsights.com8In my opinionUndoubtedly, the recent pandemic has configured a new world for all of us and the retail industry isn't an exception. After going through a series of lockdowns, the current context still represents a big challenge for this sector in many senses. One of them, perhaps the most important for operations management, is labour.Chart 1: Labour Cost in the Retail IndustryCost of labour input (ULC) per unit of output, inflation-adjusted.Source: Office for National Statistics.In fact, staffing costs have increased sensibly in the recent years relative to both pre-covid levels and the whole UK economy (see chart 1). This is mainly due to a combination of low real gross value added (GVA) and high growth in employment costs, especially fuelled by the rise in national living wage and compensation of employees (including social contributions). Indeed, according to the Low Pay Commission, 45% of all minimum wage jobs last year were in just 3 occupation groups: retail, hospitality, and cleaning & maintenance.Chart 2: Retail ProductivityUnit of real output per hour (OpH), chained volume measure.Source: Office for National Statistics.To simplify our point here, let's assume for a moment that all employment costs are given (exogenous) to any retail business (price taker), then, the key driver to minimise unit labour cost (ULCs) is productivity, defined as the output per hour worked (e.g., number of dispenses completed by a sales assistant). So far, the retail industry has detracted sensibly from productivity growth over the last years, not only dropping sharply after the pandemic outbreak but also performing clearly below the average of the whole UK economy (see chart 2).LABOUR PLANNING COMES ONSTAGEBy Maximo Pisa, Head of Planning & Retail Analytics, Vision ExpressMaximo Pisa
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