A long held belief in the retail industry is that it doesn’t make financial sense to invest in sales training for hourly employees. The reasons sometimes cited:
- Average turnover dictates that an employee probably won’t be around long enough to recoup the investment in her/his training.
- Because they’re typically non-commissioned, these employees don’t have a vested interest applying sales skill to their jobs.
- For the type of entry-level jobs that retail salespeople often occupy, there’s little need for sales training because customers already know what they need to buy.
Before addressing these reasons, let’s see if there’s any potential for sales training to pay for itself.
Consider Annie, an entry level retail employee who earns $9.74 per hour and works 30 hours per week. If she sells an average of $200 of merchandise an hour with an average 29.72% profit margin (based on estimates from the U.S. Department of Labor’s Bureau of Labor Statistics), she’s worth about (30 hours per week) x ($200 in sales per hour) x 29.72% = $1783 in gross profit to her employer each week. It costs Annie’s employer about $314 in her labor costs for that same period. Annie thus contributes, on average, over five times what it costs to employ her. With an average turnover rate of 2.9 years (based on latest data available in from the Bureau of Labor Statistics) she’ll have contributed over $268,000 in gross profits to her employer during her tenure.
Let’s say that after six months on the job, Annie’s employer invests $350 in sales training for her. As a result of learning how to cross-sell, up-sell and match the needs of her customers to the products she sells, Annie’s able to increase her sales by a conservative 8%. Over her estimated remaining tenure with her employer she will have provided an additional $17,803 in gross profits, or a 5087% ROI for her employer. Clearly, this is the type of investment that any businessperson with the resources would want to make; the amortized cost of this training investment over Annie’s remaining tenure works out to less than 9.5 cents per hour!
In a future blog post we’ll analyze each of the long-held beliefs cited above. In the meantime, consider what value sales training might bring to your organization.
