Does being open 24×7 make good business sense?
A recent article in USA TODAY discussed how retail giant Wal-Mart is reconsidering their 24×7 store operations schedule for some of their stores. Wal-Mart management insists this initiative is not planned for all stores, but for a select few.
In a time when many retailers are struggling to maintain profitability, the concept of running store operations around-the-clock raises many questions, specifically from a labor management and cost perspective.
Does the operations cost outweigh any income during those hours? Are those hours profitable? With some exceptions during the holiday season, it would seem like most stores run at a loss during those times. Does being open at 3am, when one consumer needs cough medicine, build loyalty to such an extent that it makes a store more profitable during the day? It appears Wal-Mart doesn’t think so in several of their markets. Could it be there is more theft in the overnight hours due to decreased staff? Or how about store productivity, does that dramatically change during this time?
Like any business, retailers also open their doors to make a profit. It makes sense for a big retailer to remain open 24 hours in locations where shift work is common. Keeping stores open around-the-clock near a cluster of manufacturing plants for example, could significantly increase revenue. Whereas it makes sense to close overnight if a particular store has a nightly spike in theft which detracts from profits. But does it make sense to stay open just for a small group of customers that enjoys the convenience? Many would argue convenience is not a necessity, but only an added value.
Ultimately, a decision on operating hours is about the store’s bottom line. By aligning staffing and operational needs with corporate sales and productivity goals, stores can benefit from demand-driven, cost-effective schedules. Historical trends should be used to create realistic operating plans to prevent stores being open during the majority of unprofitable hours. Metrics including sales, transactions, customers served, and units sold should be analyzed to determine the best operating schedule for each store. It appears that retail giant Wal-Mart has done their due diligence, and despite losing some late night customers reduce their 24X7 operation schedules in various markets, makes sense for their bottom line.