Wal-Mart has had a tough go over the last few years. Sure, they are still a huge force in retailing but they have run into a variety of operational problems largely related to in-store execution. (See. for example, this post.) Now the Wall Street Journal reports that Wal-Mart is gearing up for the holidays by trying to address some customer service pain points (Returning to Wal-Mart: Human Cashiers, Aug 15).
In an attempt to lure more customers this holiday season, Wal-Mart Stores Inc. is promising to staff each of its cash register from the day after Thanksgiving through the days just before Christmas during peak shopping times.
The move, called the “checkout promise,” is aimed at addressing one of the retailer’s biggest customer complaints: long waits in checkout lines, which can cause even more frustration when positions aren’t fully staffed. The pledge will cover hours typically on weekend afternoons but which can vary by store.
“We feel good about price and having the top gifts of the season, so the next priority is about getting customers in and out of the stores quickly,” Duncan Mac Naughton, Wal-Mart’s chief merchandising officer, said in an interview. “Taking the possibility of waiting in long lines off the table will attract more people into stores.” …
On Thursday the retail giant said it allocated more hours to the front end of the store, to overnight stocking, and to deli and bakery to improve customer service during the most recent quarter.
Here are two questions that are worth thinking about. First, will expanding check out capacity pay for itself? It is not immediately clear to me that it will. The article says that a Wal-Mart supercenter typically has 30 checkout lanes. It doesn’t say how many are usually staffed at busy times. Suppose that they would typically have 20 lanes staffed and that a cashier costs them $10 per hour. Then they need to net an extra $100 in profit for each hour that they staff up. More accurately, they need to net $100 in profit from folks who would otherwise have walked away in disgust if they hadn’t staffed up.
I’m not sure that is going to happen. It’s not that $100 is such a high number — and the relevant number might be much less if they would have staffed 25 registers instead of 20 and the cost per cashier is less than $10 per hour (according to Time, it’s more like $8.50 per hour). Rather, the question is how bad does the line have to be to intimidate a shopper who has willingly gone to Wal-Mart at a busy time over the holidays? If cruising the parking lot for 15 minutes to find a space doesn’t scare you away, will you ditch your basket when the checkout lines are long?
A counterargument to this is that the extra staffing cost doesn’t have to be made up in the hour it is incurred. Wal-Mart may not be too concerned that a customer will abandon her basket when encountering a long line but they should be concerned that the customer may not come back for months because of a bad shopping experience over the holidays. Arguably the whole point of publicizing these plans in August (!) is to let customer know that you are serious about service.
That gets to the second question, how do you know Wal-Mart service has gotten better if you don’t shop at Wal-Mart? This is one of the fundamental problems with trying to improve service performance — particularly waiting time performance. Waiting times are going to bounce around. That’s the nature of the beast. Some people are going to see short waits in a genuinely crappy system while others will have long waits in a well-staffed, well-run system. Unless you use the system a lot, it’s going to be hard to tell a good system from a bad one.
Now there are some people who shop Wal-Mart regularly — particularly for groceries. They should have some idea of whether service has gotten better or not. But it doesn’t seem like the improvements are really aimed at them. These loyalists are going to do their Christmas shopping at Wal-Mart already. They are going to contribute to Wal-Mart’s profit for sure — but not to the increase in profit needed to pay for the extra staffing costs. Now Wal-Mart can claim that they have reduced waiting times but anyone can claim that. The problem is that there is no guarantee that an infrequent shopper is going to actually see the improvement.
Before closing this post, I should note that there is a lot of research suggesting that store managers under value the impact of in-store labor and thus routinely understaff. I find that work persuasive but I don’t think it proves that Wal-Mart will be better off with more cashiers. The work on store staffing generally doesn’t have the detail to determine whether it is extra cashiers or more people on the floor helping customers that moves the profit needle. Here, extra cashiers at peak times are trying to address a very specific problem and it is not clear just what the extent of that problem is and whether a few extra cashiers will do the trick.