5 Ways to Offset Rising Labor Costs

By: Breanna Brown, VP of Global Marketing at APG Cash Drawer, LLC

Retailers and restaurants are looking for ways to cope with rising labor costs, which are being fueled by minimum wage hikes in different cities and states as well as competition for workers as unemployment dips below 4.5 percent.

Labor costs are one of the biggest expenses for retailers and food service companies, and while it’s hard to argue with the need to pay a living wage, some businesses that already operate on thin margins really struggle to absorb added costs.

Some restaurants in San Diego are addressing the issue by tacking on a 3 percent surcharge to customers’ checks. The tactic could backfire if customers, who already are expected to leave tips of as much as 20 percent, resent having to pay the surcharge and servers may start see a cutback in tips California is on a schedule of incremental minimum wage increases that will bring the rate to $15 an hour by 2022, but San Diego has accelerated its own wage increase schedule. In certain states, wage hikes have pushed workers to look for jobs out of state where generous tips outweigh a higher minimum wage.

Passing on increased costs is nothing new. But this isn’t the only solution to increasing wage costs. Retailers and restaurateurs should consider other options, including technology and data analytics to supplant the burden of rising labor rates. Here are some suggestions:

1. Review Staff Hours
Cutting staff isn’t advisable unless absolutely necessary. But with the help of data analytics, businesses can review staffing schedules to figure out if they could be optimized. Data might reveal, for instance, that a restaurant has too many employees on during the day when it could do with fewer – or that a retailer could close a checkout line or two in the evenings.

2. Review Hours of Operation
There’s a tendency to stay open as many hours as possible to offer convenience. But a review of how much revenue is generated during which hours could show that closing earlier or opening later might make sense on some days. Especially for restaurants, which can experience slow periods between meal times, reducing hours of operation could help save money.

3. Automate Tasks
Automation gets a lot of attention these days. The ability to replace costly, repeatable manual tasks with automated processes is very attractive to businesses looking to boost efficiency and lower costs. French grocer E.Leclerc uses an electronic labeling system that allows the company to change prices across stores simultaneously. In the United States Lowes is piloting customer assistance robots. And an increasing number of quick-service restaurants are deploying both table side and unattended self-service ordering kiosks.

4. Deploy Cash Management Solutions
Retailers and restaurateurs spend a lot of time on managing cash when they do it manually. Deploying cash management solutions that automate payments at checkout lines and ordering stations can save a lot of time and money. Intelligent Cash Drawers eliminate the need for manual counts by keeping real-time records on the amount of coins and bills at all times, saving hundreds of staff hours for business weekly.

This supplies additional business intelligence for manager security alerts, identifying cash transaction errors, manager operational alerts, cash lifts, float top ups, instant cashier profiling and cash drawer performance analysis. When paired with smart safes and security cameras, the time spent on investigation of cash loss decreases significantly and businesses experience cash loss reductions of up to 90 percent.

5. Outsource Labor-Intensive Tasks
Grocers and retailers can outsource some labor-intensive activities to third parties, such as inventory resets, product management and data collection. Allowing specialized companies to handle such tasks unburdens businesses from time-consuming functions so they can focus on running the business and customer-facing activities.

Not all of these options work for every business. Some are more suitable to restaurants than retail stores, and vice versa. But before deciding to cut staff or pass on costs to customers, retailers and restaurateurs should consider each of these options.