Retailers Cut "Boots On the Floor" At Their Peril

(MoneyWatch)  In a downturn, retailers often cut first from the invisible workforce, those inventory managers, stock clerks and other backroom warriors who don't have much to do with the customer experience.

And that's a huge mistake, argues Harvard Business School professor Zeynep Ton. In fact, it's just these employees who may make or break a deal with your customers.

In an interview with HBS Working Knowledge, Ton discusses her research that shows that more labor, "boots on the floor," actually increases store profit. The reason? They keep inventory is where customers expect to find it.

She explains:

"My research reveals that what happens in the last 10 yards of retail supply chains is really important. Customers often experience stockouts not because the supply-chain plans are poor, as we often assume, but because they are not executed well at the stores."

So if employees are spread too thin, product is not refreshed on the sales floor as often as it should be, stock is misshelved, inventory is mislabeled, and neither the customer nor associates can find the merchandise. The result: The customer goes to a competitor, never to return.

Ton concludes:

"For retailers that sell undifferentiated products, offer a self-service environment, and compete on the basis of product availability, having the right product in the right place at the right time with the right label and of course with the right price may be what really drives customer satisfaction."

This post first appeared on the BNET Insight blog The View From Harvard Business.