By BoF Insights, McKinsey & Company
Differentiating the in-store experience is key to reigniting demand for in-person shopping, according to the BoF-McKinsey State of Fashion 2025. Brands can achieve that by empowering their store associates to reach their full potential.
Key insights
- Store associates can be a key differentiator in customer satisfaction across regions, according to the BoF-McKinsey State of Fashion 2025 Consumer Survey.
- 75 percent of shoppers are likely to spend more after receiving high-quality service from store personnel, indicating upsell and cross-sell opportunities.
- A 2024 study found that more than 20 percent of missed sales at a prominent US retailer were related to issues with store associates, such as suboptimal engagement or unavailability of staff.
Now that the post-pandemic flurry of customers returning to stores has begun to cool, in-store sales growth is forecast to be around 1 to 2 percent on average across key markets in 2025, compared to the last few years of high single-digit to double-digit growth.
This normalisation comes as store foot traffic is approaching pre-pandemic levels across regions. Some markets like continental Europe anticipated surpassing their pre-pandemic offline market size in 2024.
However, the role of the store has evolved globally. It is estimated that almost 70 percent of retail sales today are digitally influenced, making stores more of a destination for conversion and building brand loyalty than initial discovery. 54 percent of apparel shoppers say they prefer to buy clothing in brick-and-mortar locations versus online.
As store growth decelerates, retailers will need to further differentiate their store experience from the competition to convert customers in stores. While retailers have been focused on delivering digital innovations in store, in doing so they have deprioritised some of the basics that shoppers returned to stores for in the first place, such as the human side of sales.
Now that the post-pandemic flurry of customers returning to stores has begun to cool, in-store sales growth is forecast to be around 1 to 2 percent on average across key markets in 2025, compared to the last few years of high single-digit to double-digit growth.
This normalisation comes as store foot traffic is approaching pre-pandemic levels across regions. Some markets like continental Europe anticipated surpassing their pre-pandemic offline market size in 2024.
However, the role of the store has evolved globally. It is estimated that almost 70 percent of retail sales today are digitally influenced, making stores more of a destination for conversion and building brand loyalty than initial discovery. 54 percent of apparel shoppers say they prefer to buy clothing in brick-and-mortar locations versus online.
As store growth decelerates, retailers will need to further differentiate their store experience from the competition to convert customers in stores. While retailers have been focused on delivering digital innovations in store, in doing so they have deprioritised some of the basics that shoppers returned to stores for in the first place, such as the human side of sales.
75%
— of shoppers in 2022 were likely to spend more after receiving high-quality service
more than 20%
— of missed in-store sales were related to issues with store staff, such as poor engagement or unavailability
Store associates are crucial in differentiating the store experience
Non-human elements of the shopping journey and store characteristics tend to be must-haves or hygienic factors. These elements drive both high satisfaction when present and dissatisfaction when not present, but do not tend to differentiate the experience or increase sales.
Human interactions such as interactions with store associates tend to be key differentiators of the in-store experience. These boost shopper delight and are key drivers of conversion and loyalty, since these exchanges are only possible in stores.
Human interactions are particularly important to aspirational and younger consumers. The former are up to 2x as likely to seek styling advice from staff compared to value and mid-market shoppers, and the latter are 1.5x as likely compared to shoppers over the age of 50.
Solving human capital challenges is essential to retaining associates in today’s labour market
Shoppers are the least satisfied with human interactions in their store experiences, scoring as much as 25 percentage points below other aspects on average, including fitting rooms and checkout transactions and store atmosphere.
Satisfaction with store staff is lower in the US, UK and Germany compared to China, where shoppers are around half as satisfied.
While satisfaction is low across age groups, shoppers under the age of 30 show higher net satisfaction of 43 percent compared to 32 percent for those aged 50 and above. In contrast, older shoppers tend to be more delighted by the store atmosphere.
In 2023, 75 percent of global companies across industries reported operating without enough frontline employees.
The labour shortage is particularly pronounced in retail. As of May 2024, there were 2.5 million more retail job vacancies than job seekers in the US. More than 44 percent of US retail workers are planning to leave their jobs within three to six months.
This is also evident in the luxury sector, where some flagships in Paris reported operating with staff shortages of 20 percent in 2024. Industry leader LVMH forecasts it will need to recruit 22,000 new workers by the end of 2025, nearly two thirds being sales associates.
In the past few years, US retail wage growth has outpaced other sectors. Since the pandemic, retail hourly wages have increased by over 20 percent vs 11 percent in the private sector.
Retail pay growth in the UK continues to outpace other sectors. In August, pay was up 9 percent year on year. This was partially driven by the near 10 percent increase in the national living wage in April 2024, which impacted a significant portion of the frontline retail population.
Rising workforce costs are making the industry’s high turnover more costly. Losing a single frontline retail employee can cost a retailer $2,000 to $10,000 on average. Costs tend to be higher for managerial positions and more experienced employees. Multiplied by thousands of employees across multiple years, those costs can weigh on a retailer’s bottom line.
up to $10k
— the average estimated cost of losing a single retail frontline employee
Upskilling staff and investing in tech support tools will enable better customer interactions
Upskilling store staff
Upskilling and training store associates is the top priority for executives aiming to improve sales and customer engagement in stores in 2025.
Professional development of store associates has long been a priority for retailers, given the young and inexperienced workforce (more than 30 percent of all first jobs in the US are in retail). However, the focus on training is expected to increase in the year ahead.
As staff turnover continues to rise, retailers will need to increase the speed and cost-efficiency of training. Formats like AI-powered training and micro-learning, where content is broken into small chunks, will play an increasingly important role.
Training has a positive impact on employee satisfaction and retention. One large retailer that implemented college-level courses and skills certification found its employees were four times more likely to stay in their jobs.
In 2024, Reiss partnered with AI-powered learning platform Thrive to boost employee development by enhancing the onboarding process, celebrating internal achievements and creating a collaborative learning environment. Meanwhile, Aritzia has a “University” programme that includes onboarding for new hires and ongoing training for existing employees. This year, it reported providing >80,000 hours of formal training.
Optimising customer interactions with tech
More than half of fashion executives agree that the use of digital tools to facilitate omnichannel sales will be a key priority in the year ahead.
As store associates shift to focus more on customer interactions, it will be important to arm them with the tools and knowledge to meaningfully engage with customers. New customer relationship management (CRM) enabled technologies can help store associates get real-time information about the customer they are interacting with to make for a better store experience.
Luxury and non-luxury brands alike have begun using technology to track engagement and connect with customers after they leave the store, while others are providing staff with data-backed, personalised customer recommendations for cross-sell and upsell opportunities in store.
For example, Kering’s clienteling app, Luce, provides store associates with tailored product recommendations and personalised promotions for customers. The app has boosted the average order value by between 15 and 20 percent.
Similarly, in August 2024, Target rolled out a generative AI-enabled tool called Store Companion at its >2,000 stores. The tool improves store associates’ efficiency by providing live coaching and on-the-job answers to questions about processes.
Employee incentives should reward customer lifetime value and reflect modern shopping habits
Creating staff incentives that prioritise customer interactions and relationship-building can increase both sales and employee satisfaction. When incentives align with the parts of work employees deem meaningful, they can feel more fulfilled and appreciated.
For any sort of incentive, the key performance indicators of staff success need to reflect new ways of working. Changes might include rewarding staff based on onboarding new loyalty members or driving omnichannel sales, such as digital sales ordered in store.
Revised incentives are required to reward customer lifetime value over individual transactions and better reflect modern shopping journeys. Browsing in store remains an influential channel for learning about products, yet as of 2021 only 31 percent of businesses measured the contribution of stores to digital sales, and vice versa.
Among the companies revising incentives is Frasers Group, which hosts a festival for its employees every year and holds monthly peer-nominated awards for “champions” across divisions, where winners receive public recognition plus double pay for that month.
This can directly impact retention rates. Dior saw a 10 percent improvement in employee retention after launching a platform where staff could earn performance-based points redeemable for tailored experiences, such as luxury spa days and wine tastings.
Nordstrom associates can invite customers to receive “Style Board” emails where they can curate collections of products and still receive commission on those digital purchases. Even though it is not mandatory, the majority of employees use the feature.
Store staff should be freed up to focus on customer-satisfaction drivers
Retailers are increasingly adopting data-driven approaches to staff deployment, improving both how and where staff allocate their time.
Leading retailers are capturing data on transactions and footfall, including movements within store, to make better scheduling decisions. Aritzia store scheduling decisions are informed on a daily and weekly basis by traffic data, shopper-to-associate ratios and sales productivity expectations.
Additionally, companies are testing different approaches to understand where human capital is best deployed to drive incremental sales. For example, a US-based sportswear brand reworked its staff deployment model after learning that staff coverage of the fitting rooms was key to driving both sales and basket size through cross-selling and upselling. Faherty uses gig-style staffing during holidays and high-traffic times to support backend activities like steaming and stacking. Using the specialised gig platform Reflex, the company employs gig staffing for around 10 percent of hours per week.
Streamlining manual tasks
Retailers can leverage technology to automate and streamline activities such as digital task management, ordering and production planning, which can free up employee time for more customer-centric activities.
For example, BJ’s Wholesale automates inventory tasks by using Simbe Robotics’ robot, Tally, which Simbe reports can reduce e-commerce fulfilment time and improve worker safety by automating tasks like manoeuvring large pallets.
Although the technology is not new, unlocking the full value of radio-frequency identifiers (RFID) in store operations should continue to be a priority for retailers in the year ahead. Correct implementation of RFID across inventory-related store processes can lead to a 10 to 15 percent reduction in associated labour hours.
Additionally, brands are increasingly testing customer-facing RFID use cases that make the customer experience more seamless while freeing up store associate time. Though nascent, RFID self-checkout is set to expand in the coming year; Radar, a technology company that works with major apparel retailers such as American Eagle, plans to launch its RFID-powered checkout function in 2024.
Uniqlo’s self-checkout, where shoppers drop items into an RFID-enabled basket, is used in 70 to 90 percent of transactions across markets and is credited with cutting transaction times in half.
Employee experience is central to customer satisfaction
In retail, there are six main factors that impact employee retention. US employees plan to leave their jobs primarily due to concerns about career development, citing limited growth opportunities. Compensation issues rank second, influenced by macroeconomic pressures. Employees passionate about the industry, however, tend to cite these factors as reasons to stay, hence investments in career development and compensation can be a “win-win” for retailers looking to reduce the high costs of staff turnover.
This underscores the importance of defining a company-specific target employee profile, whether that be career brand enthusiasts, retirees looking for a store discount or part-timers seeking flexibility.
Improved employee experience can make for more satisfied, tenured workforces and more satisfied customers, too. Companies with top-quartile employee experience are twice as likely to have top-quartile customer experience.
Employees with high satisfaction tend to have a higher calibre of output as they typically are more tenured and make fewer errors on the job. Retail workers also value customer interactions, citing “relational” elements of the job as a key part of why they deem the work meaningful.
How should executives respond to these shifts?
1. Enable staff with training and tools to improve customer interactions
Upskill store personnel by arming them with the knowledge and tools needed to improve customer satisfaction and engagement. This can include training them on relationship management and product expertise, as well as providing them with tools and real-time customer analytics to improve product recommendations.
2. Motivate store associates with broader incentive structures
Extend both hard and soft incentives to drive conversion and longer-term customer value, rewarding associates who drive future digital purchases in addition to immediate, in-person ones. Have corporate and in-store management champion the goals to illustrate how they are valued by the entire organisation.
3. Optimise processes to refocus store personnel on high-value activities
Automate and digitise select manual processes, such as merchandising and returns, to rework the role of store personnel in a way that drives customer conversion. Identify where to deploy sales associates versus automated or self-service options by analysing the key turning points in conversion that will maximise return on investment.
4. Retain employees with coaching and one-to-one interactions
Make changes to employee benefits to attract and retain high-quality store personnel, tailoring changes to the target employee and their motivations. In doing so, career development pathways will be essential in driving retention and brand buy-in. Leading retailers can achieve this by offering academy-style courses that fully immerse their associates.
This article first appeared in The State of Fashion 2025, an in-depth report on the global fashion industry, co-published by BoF and McKinsey & Company.
Feature Image Credit: Shutterstock
