Labor Management: A Key Lever for Growth in the Grocery Sector

Labor costs have always been a critical component of grocery store operations, serving as a major influence on overall profitability. As we enter fiscal 2024, these costs have surged to unprecedented levels, intensifying the pressure on slim profit margins. According to the 2025 Independent Grocers Financial Study, conducted by FMS and NGA, total expenses now constitute 25.8 percent of sales, with labor and benefits making up the largest portion.

To navigate this challenging landscape, grocers are not merely focusing on survival; they are striving for smarter growth. Efficient labor management may emerge as the pivotal factor determining their success.

Labor: The Largest Expense Category

Labor and benefits have surged to record highs in 2024, accounting for 13.7 percent and 2.6 percent of sales, respectively. Multi-store operators have reported significant increases in these expenses, along with rent and CAM costs, all reflecting the complexities of managing larger operations.

While previous years’ pandemic-driven sales spikes may have obscured operational inefficiencies, 2024 has exposed the urgent need for independent grocers to optimize labor practices in order to remain competitive.

One operator articulated this shift: “Scheduling based on intuition no longer suffices. We analyze sales by hour, department activities, and even consider weather patterns. This transition has allowed us to reduce overtime while still ensuring adequate coverage.”

Beyond Wages: The Challenge of Hidden Costs

The narrative surrounding labor costs extends beyond just hourly wages. Grocers are witnessing sharp increases in associated expenses such as benefits, credit card processing fees, and interest payments. Alarmingly, many report spending more on credit card fees than on their marketing initiatives combined.

Thus, traditional cost-cutting measures prove insufficient; a strategic, data-informed approach to labor management that harmonizes service quality with efficiency and employee morale is essential.

By pinpointing periods of underutilization or overutilization of labor hours, grocers can make precise adjustments that enhance profitability without sacrificing customer service.

Understanding the Challenges: Single-Store vs. Multi-Store Operators

The study reveals differing cost experiences between single-store and multi-store operators. Multi-store grocers face elevated labor and CAM expenses but enjoy lower costs in utilities, supplies, and credit card processing, hinting at possible efficiency gains through economies of scale.

However, scaling without a strategic approach can backfire. Multi-store operators often grapple with visibility and consistency across locations, prompting both individual and larger retailers to adopt centralized labor management tools to regain control.

Conversely, single-store operators often find their flexibility a significant advantage. “I can implement new ideas much quicker,” shared one owner-operator. “Upon realizing excessive Sunday coverage costs, we restructured shifts within a week.”

Evolving Labor Management: From Hours to Insights

Navigating today’s labor landscape requires more than traditional spreadsheets; it necessitates actionable insights and innovative technology.

Tools like Workhappy and Labor Saver from FMS Solutions enable grocers to take a proactive stance in labor management. These platforms equip operators to:

• Forecast demand and create accurate schedules;
• Monitor labor costs as a percentage of sales in real time;
• Enhance employee satisfaction through fair and transparent scheduling;
• Identify efficiency gaps across departments and stores;
• Adjust labor deployment based on sales trends rather than tradition.

Instead of making arbitrary cuts, grocers are employing insights to align staffing with actual customer traffic and productivity, yielding immediate results.

One retailer shared their discovery: “We found that we had three employees clocked in on weekday mornings when customer traffic was minimal. A simple adjustment saved us 10 hours each week.”

Precision Scheduling: The Key to Efficiency

Data from FMS indicates that grocers utilizing scheduling optimization tools experience an average reduction in excess hours by 3-7 percent. Even modest gains can yield significant savings, especially for high-volume locations or multi-store chains.

Consequently, operators are transitioning from reactive scheduling to proactive workforce planning. By analyzing trends across departments and locations, grocers can determine:

• Optimal sales times;
• Which employees excel at specific tasks;
• Where labor hours can be reallocated to maximize returns.

Enhanced onboarding and training processes are also vital for reducing turnover, which can inflate long-term labor costs. Tools like Workhappy allow employees to access schedules, request time off, and communicate with management, thereby reducing no-shows and increasing engagement.

Efficiency as a Competitive Advantage

As we navigate a landscape where every fraction matters, grocers are re-evaluating how they deploy their most valuable resource: human capital.

Through cross-training staff to fulfill multiple roles, automating scheduling tasks, and utilizing labor dashboards, grocers are employing innovative strategies to cut costs while maintaining service standards. In a tight labor market, such approaches not only save money but also drive employee satisfaction and retention. As one operator remarked: “When employees feel they have fair schedules and a voice, they are more likely to stay and perform at their best.”

The Bottom Line

Independent grocers are adapting to a challenging environment marked by narrower margins, rising costs, and increased customer expectations. In this context, labor management transcends being merely an expense to oversee; it becomes a vital driver of growth.

By evolving from reactive to proactive labor strategies, grocers can enhance efficiency, elevate team morale, and safeguard their financial performance. With suitable tools and insights, labor can transition from a liability to a significant competitive advantage.

Every point of improvement counts. The FMS Labor Management Suite enables precise planning, optimal staffing, and the reduction of unnecessary costs—all while maintaining high service levels.

Let’s explore how implementing smarter labor management can drive your grocery operation forward.

The FMS Labor Management Team
FMS Solutions