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Higher retail salaries boost bottom line

March 24, 2013 at 5:24 PM   |   Comments

BOSTON, March 24 (UPI) -- A Harvard case study finds retailers QuikTrip, Trader Joe's and Costco, which pay their workers well, have better bottom lines, a researcher says.

"Retailers start with this philosophy of seeing employees as a cost to be minimized," Zeynep Ton of the Massachusetts Institute of Technology's Sloan School of Management told the National Journal. "That can lead businesses into a vicious cycle. Under investment in workers can result in operational problems in stores, which decrease sales and low sales often lead companies to slash labor costs even further. Many employers have turned full-time jobs into part-time positions with no benefits and unpredictable schedules."

QuikTrip, a convenience-store and gas-station chain; Trader Joe's, a grocery chain and Costco, a warehouse discount chain operate on a different model, Ton said.

"They see employees as assets to be maximized," Tom said.

For example, the average U.S. cashier makes $20,230 a year, but at QuikTrip, entry-level employees make around $40,000, plus benefits, a year.

Yet, QuikTrip sales per labor hour are two-thirds higher than the average convenience-store chain and sales per square foot are more than 50 percent higher, Ton found.

During the recession, QuikTrip's competition was laying off staff and shuttering stores, but QuikTrip expanded to its current 645 locations, Ton said.

Those hired at QuikTrip are trained for two weeks before they start work on every job from from ordering merchandise to cleaning the bathroom.

Although the approach seems like common sense -- training and paying employees to help customers effectively -- is more profitable than under valuing staff, Ton said.

Look no further than Borders or Circuit City, Ton said, both had sales plummet after staff cutbacks, and both ultimately went bankrupt.

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