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Employment costs vs. profitability of retail – how can technology help?

Przemysław Kozera, 20 sierpnia 2020

FMCG is one of the sectors most hit by rising employment costs. Said rise affects not only profitability but also business development potential. For those who want to grow despite the current economic situation it creates a barrier that is preventing further expansion. How can you increase profitability while keeping employment at the current level? Here’s where innovative technologies come into play.

According to Eurostat in 2020 the average hourly labor cost is EUR 27.7 ranging from EUR 6.0 in Bulgaria, EUR 7.7 in Romania and EUR 9.4 in Lithuania to EUR 36.4 in The Netherlands, EUR 36.6 in Sweden and EUR 35.6 in Germany. 

Looking at these numbers it becomes obvious, that it’s the ‘Old Europe’ countries that are taking the brunt of the increase in employment costs and are affected by low profitability. Higher prices do not fully compensate for those costs, limiting the ability to grow.

One of the solutions to this problem is the introduction of autonomous solutions. Contrary to the pessimistic picture painted by the media this does not necessarily mean staff reductions. Based on the data gathered by Take&GO, Europe’s first autonomous store, the optimal way of deploying autonomous solutions in a store environment means keeping the existing workforce and using it to coordinate and manage other autonomous stores. This results in increased productivity as well as reduced work complexity and also paves the way for opening more stores which in turn increases revenue. Take&GO estimates that keeping the existing workforce and introducing autonomous solutions leads to a 43% increase in revenue compared to a scenario where the owner decides to reduce the number of staff. Just by introducing autonomous technologies you can cut waste by 50%.

What are the disadvantages of autonomous solutions? To begin with, the technology is expensive and requires time to be implemented the right way. If you decide to enter your chain into the 21st century it’s best to work with companies which already have such solutions available. This helps to avoid a lot of the early stage challenges that are typical for large scale IT solution deployments. It is also important to optimize the deployment phase in order to achieve full profitability quicker. It’s impossible to ignore the ROI aspect – the more stores switch to the autonomous mode, the sooner you see a return. Introducing autonomous solutions will be most beneficial to companies employing a large number of staff and managing a many stores.