Challenges of Labour Forecasting in Retail: 5 Factors to Consider

For retailers, balancing staff coverage with payroll budgets is an endless challenge. Inaccurate forecasts lead to heightened costs or understaffing issues. Smart retail labour forecasting practices can help calculate an ideal balance between customer service excellence and employee satisfaction. Here’s what you need to know.

The task of accurate retail labour forecasting

More than 25% of all jobs in the United States are related to the retail sector. With such a large percentage of the workforce connected to retail, accurate labour forecasting plays a big role in work satisfaction for millions of workers.

Unlike short-term retail scheduling, which creates daily and weekly work schedules, labour forecasting is a long-term strategic process. It factors in big-picture variables to develop a workforce plan that aligns staffing needs with labour demands over time. 

At its core, the retail labour forecasting process focuses on one logistical goal: to balance excellent customer service with profitability. Accurate models can mean the difference between a balanced workforce and costly imbalances, such as: 

  • Overstaffing that bleeds profit and expenses

  • Understaffing that damages the retail brand

For cost-conscious retailers, this can translate to thousands of dollars in savings. 

Realistically, managing it all manually is a task very few retailers can afford to risk — guesswork can go wrong for many different reasons. This is why informed retail labour forecasting is so crucial. 

5 factors to consider for retail labour forecasting

We stress the importance of accurate labour forecasting for shift work industries. These five key factors are tailored to help retail businesses make more informed workforce planning decisions. 

1. Customer traffic and sales forecasts

Anticipated sales volumes and customer foot traffic patterns are the foundation for retail labour forecasting. A detailed understanding of historical sales data helps:

  • Identify notable trends in transactions and revenue.

  • Compare current sales with previous periods.

  • Reveal any recent dropping or underperforming sales.

Factor this into forecasting

Don’t overlook labour needs for non-revenue generating yet crucial tasks like restocking shelves, creating displays, and maintaining back-of-house processes. These efforts are just as important for a smooth customer experience but often go unaccounted for in labour forecasting. 

2. Seasonality

Depending on the industry, retailers experience up to 38% increased holiday sales, while others may have regular peaks at different times of the year. During peak sales seasons, the demand for retail staff increases to handle these higher transaction volumes. 

The retail calendar sometimes revolves around seasonal sales drivers. Holidays, back-to-school periods, and seasonal product availability can make or break retail performance. Proper accounting for these peaks and valleys is necessary for labour forecasting, but there is more to consider than just seasonal sales volume. 

Factor this into forecasting

Sales depend on the quality of the customer experience. Meeting customer needs in peak seasons means delivering exceptional service. Ask yourself: 

  • What are the most important seasons and events for sales?

  • When should I hire additional staff ahead of these periods?

  • How long will it take to appropriately train staff to prepare for these sales windows?

A labour forecasting tool can help you determine the answers. When optimal hiring and training timelines are in place, you can make the most of your retail scheduling system to keep sufficient staff on hand, ready to deliver outstanding service during high-stake sales seasons.

3. Employee skills and roles

Not all retail work is created equal. Management, full-time sales associates, and part-time staff all play different retail roles. Retail labour forecasting must account for the specific employee skills, responsibilities, and scheduling requirements for different staff positions. 

Factor this into forecasting

Labour forecasting should consider: 

  • The right mix of managers and support staff at any time

  • Employee skill gaps or roles that may need backfilling months out

  • Employee performance metrics that impact retail efficiency

Retail labour forecasting can identify when key workers may leave their roles, such as at the end or beginning of a school year, and when to schedule the most skilled employees to reap the biggest benefits for your bottom line. 

4. Employee availability and shift preferences

Although the target for many companies is a 10% employee turnover rate, the US national average exceeded 40% in 2023. Retail businesses report even higher rates of turnover at 65%.

Retail environments are not known for employee schedule flexibility, but factoring in staff availability and shift preferences whenever possible can bring enormous benefits. Even small accommodations can increase staff morale. In turn, this reduces costly turnover and absenteeism that throw off labour forecasts. 

Factor this into forecasting

Retail employee availability and preferences data is valuable for immediate staffing needs, but forecasting tools are key to keeping employees happy and the business stable in the long run. 

Consider availability and preferences by: 

  1. Asking employees about their preferred working hours or schedule constraints

  2. Using retail employee scheduling software that integrates this data automatically

  3. Offering flexible shift options, like split shifts or rotating schedules

  4. Cross-training employees in different roles during busy periods

  5. Maintaining open communication about availability and preferences

  6. Reviewing and adjusting data to identify gaps and areas for improvement

This can help reduce employee churn and streamline the forecasting process. Staffing ebbs and flows are easier to predict in businesses with low turnover rates compared to high-churn environments.

5. Labour laws

Compliance with labour laws is non-negotiable. Retailers want to keep costs low while keeping adequate staffing levels but must adhere to laws and regulations such as:

  • Meal and rest breaks  

  • Overtime requirements 

  • Consecutive shift limits 

Failure to account for these labour regulations can lead to penalties and fines. 

Factor this into forecasting

Laws can vary by local jurisdiction. For multi-location retailers, this can make managing compliance a challenge without robust tools. Relevant retail labour forecasting models, however, can help apply rules and regulations around: 

  • Breaks and meal periods

  • Total hours worked

  • Consecutive shifts

  • Employee data (age, clearance, etc.)

This process helps avoid costly overscheduling that can result in non-compliant practices. 

Simplify your retail labour demand forecasting process

Even for small teams, accounting for all the variables of retail labour forecasting is a big task. It can be difficult to balance compliance and expenses while avoiding employee burnout and delivering great customer service. 

Don’t try to tackle demand forecasting manually. Instead, let automated retail labour forecasting do the heavy lifting. 

Leverage the power of data-driven insights with a smart labour forecasting system. Learn how Deputy’s smart scheduling can help.