Sainsbury’s is far from the only retailer seeking to streamline its business amid turbulent times, but today’s staffing overhaul attracted plenty of attention.
Head office and support functions have borne the brunt of restructuring measures in the past year or so, such as Tesco’s summer streamlining of 1,200 head office staff and the closure of its Cardiff call centre.
But this morning Sainsbury’s revealed changes that would largely impact its stores.
Some 600 jobs will be lost centrally as it reshapes its HR functions at Sainsbury’s Bank and Argos, but a further 1,400 will be axed in stores as it strips out HR and payroll clerk roles.
While job losses of such scale are always regrettable for the businesses that need to make them, the harsh reality is that the world has moved on – and retailers have to move with it.
The shift to online shopping, the ever-expanding reach of Amazon, the introduction of the national living wage and the apprenticeship levy, and the increase in sourcing costs following the fall in the value of the pound have all forced retailers to forensically examine their cost bases in order to protect profits and margins.
“I think we’ll see every retailer over the course of the next few years looking for ways to digitise various tasks in-store”
IT systems and technology have advanced at an equally rapid pace, meaning a number of highly labour-intensive roles that previously cost retailers hundreds of thousands of pounds every year can now be completed for a fraction of the cost.
Against that backdrop, they have to place their supply chain, trading, marketing, buying, human resources and shopfloor operations under the microscope to ensure they are getting bang for their buck from every function.
Does every store really need someone to oversee HR and a separate clerk to manage payroll, for example?
The answer – and the one Sainsbury’s has arrived at today – is almost certainly ‘no’.
Tasks like managing store rotas and pay simply don’t need to be carried out by individuals, when payroll and personnel management systems like PeopleSoft are at retailers’ disposal for a fraction of the price.
As one management consultant tells Retail Week: “Sainsbury’s has invested heavily in doing a lot of digital work over the last few years – and that’s not been just about the customer experience, it’s been about digitising the colleague experience as well.
“They will have things like rota tools available on people’s smartphones and staff will be able to request holidays in that way as well, therefore the requirement for the same headcount in terms of HR will inevitably have disappeared.
“I think we’ll see every retailer over the course of the next few years looking for ways to digitise various tasks in-store.”
But while manual tasks such as stock taking and re-ordering products could ultimately be lost to technology, retailers will likely seek to maintain service levels on the customer-facing frontline of stores.
Sainsbury’s big four rival Tesco spoke at its half-year results about how “simpler structures” and changes to its replenishment model had freed staff up for more than 45,000 additional hours, which they could instead spend directly serving shoppers.
Another consultant explains: “Customers want all of these new and exciting services, but often it takes people in-store to make that happen.
“But at the same time, retailers have to remain incredibly competitive, so I think it is the support functions where retailers will find different answers, like outsourcing.”
Is the cashier role next to be axed?
Although Retail Remedy partner Phil Dorrell believes there is more streamlining to be done within logistics and the supply chain, he predicts stores are braced for a payment revolution that will spark another wave of job cuts across retail’s shopfloor.
“Self-scan checkouts have made a massive difference to the profitability of some of the smaller stores, but the use of those has plateaued,” Dorrell suggests.
“In the next three to five years … you will see the sort of technology that will allow people to verify who they are, select goods and just walk out with them.”
Phil Dorrell, Retail Remedy
“The next leap is likely to be technology that reduces the need for cashiers, like Amazon is trying in its Go store.
“That’s not going to happen immediately, but in the next three to five years it will be here – you will see the sort of technology that will allow people to verify who they are, select goods and just walk out with them.
“For food and highly consumable products, that’s the way it will be. I can see it happening at places like Screwfix, Toolstation, B&Q, Halfords – simply because they are rather mundane purchases, they aren’t considered and you don’t require anyone’s input.
“That technology will help them trim their labour costs. It won’t happen next year, but it will happen eventually and I think it will be the biggest change we see in retail in the next five years.
“Yet, even at that point, the drive to save on labour costs won’t stop”, Dorrell insists.
“It will continue forever,” he warns.
Sainsbury’s is not the first and certainly won’t be the last to choose technology over manpower as a means of cutting costs.