Production Verses Productivity
Two make or break measures
A sales floor full of fresh goods is key to making money in thrift. Even a garage sale does better when it has a lot of stuff.
Want to increase your customer visits? Keep fresh goods coming to the sales floor throughout the day every day.
“Miss a day, miss a deal” should be a real thing in a thrift store.
Big box stores are much the same. If there are empty pegs and shelves all over and displays are outdated or sparse, people eventually go elsewhere. Early in my career, I had a boss that loved to say “we don’t sell pegboard son”. Sure enough, he was right. About the peg board anyway, not so much the son part.
From Walmart to thrift a key secret to my retail success has simply been keeping the sales floor full and fresh.
Easier said than done, still has to be done.
In a fascinating parallel, any store with a disorganized, stuffed back room will have a disorganized, poorly merchandised, and stocked sales floor. In thrift, it can be a little more hidden when stale goods aren’t pulled. That might help a store look full, but it won’t be fresh. In my book, between fresh and full, fresh gets the edge.
. . . . .
In retail like most businesses, labor is the most controllable or variable expense. The measure of success or failure is often how productive that labor is.
There are a couple of ways to look at labor expense, production, and productivity. Production is how much gets done and productivity is how efficiently it gets done.
Traditional retail knows what’s going on in detail. Computer tracking of every item, item velocity, near real-time sales, how many pieces fit on the designated space on a shelf, real-time labor cost tracking, and on and on. A few POS systems are trying to match some level of detail in thrift. Short of spending a bucket of money on one of those what to do?
Knowing how much of what goes to the sales floor is critical information. Lots of things become visible when production and productivity are tracked consistently.
Production has to be measured against the labor cost of getting goods to the sales floor.
What is the labor cost to get X amount of merchandise on the sales floor? Ten people taking 8 hours each to put a total of 1,000 items on the floor may not be good. Ten people putting a total of 10,000 pieces on the floor might be amazing. Unless that information is specifically tracked, who knows?
Let’s break down those extremes:
10 people, 80 labor hours. Let’s say $20 per hour (all in), gets you to a $1,600 cost for the day. Divide that by a thousand pieces processed and you are at $1.60 production labor cost per item. If your average item sells for $5, your production labor cost is 32%. Not counting the rest of the staff and all those other pesky expenses. If you sell through is 50% as it is in many thrift stores the actual cost doubles. Yikes!
Those same people putting out 10,0000 pieces creates a labor cost of 16 cents per item. That’s processing 125 items per hour per person. Depending on the skill, tools, and processes in place that can be a doable number.
Breaking that down to per person:
Going with $20 per hour labor costs 1,000 items produced per person is 125 pieces per hour. If you don’t think that’s realistic let's dial it back to 75 per hour. That’s 600 pieces in a day with a direct labor cost of 26¢ each, or 52¢ at 50% sell-through. Manageable.
Some categories will naturally take less time per item than others. Books go fast, sorting jewelry not so fast. The value produced per day could be nearly equal. That’s an important measure, maybe for another day.
Knowledge truly is power. It’s also profit.
Some math:
I suggest doing this weekly and monthly overall, by category and by person:
Pieces produced X average price per item = estimated value produced
Production labor hours/pieces sold = production cost per item sold
Pieces produced -(pieces sold + pieces ragged or rejected) = net gain or loss of total inventory on the sales floor.
Textiles for example, usually include people dedicated to just sorting and hanging those goods. In those cases, it’s a matter of separating their hours and production. Lower-volume stores may find it harder to separate those costs. As the volume goes up and people specialize more it’s easier to break these out.
I strongly recommend having goals for each producer based on the type of product they are working on. Then have them document how much they put out each day. An easy way to do that is to have a sheet where they note how many pieces were worked on to each cart or rack. It’s a simple matter of having management double-check. Total each day and track on a simple spreadsheet. Easy Peasy.