Our Top 30 list, using sales and staff cost figures from 2021/22, reflects businesses’ positions a year to 18 months ago — the market has experienced significant changes since then and it will be interesting to see how their future rankings are affected by the current situation

Some retailers that are well known for their efficiency, such as Amazon and Aldi, do not appear on the ranking because they do not split out staff costs in their financial reports. For others, such as Ocado, their reliance on expensive staff with technology expertise means their staff costs to sales ratio is lower than those in our top 30. However, their use of that technology is likely to bring significant future productivity gains.

The ranking also highlights some interesting broader trends that continue to play out in 2023. 

Etailers are strongly represented, for instance, with 13 out of 30 entrants being pureplays.

“Etailers have the advantage of having lower overheads, with no shop floor employees. This improves their productivity ratio when compared to those with stores,” says Retail Week Prospect analyst Hanna Hua.

Even a few of our best performing multichannel retailers, such as homeware retailer Loaf (11th) and fashion retailer End Clothing (13th), are online-led businesses with a few carefully selected stores supporting digital sales. This makes for a more likely productive model than retailers with large legacy store estates, which may be in the process of closing stores and right-sizing their estates in a bid to cut costs and focus on the most profitable and productive stores.

Mixed fortunes for etailers

The top 10 etailers include several names that have had a rollercoaster couple of years.

Ranked fifth, In the Style, for instance, is currently conducting a strategic review after reporting a loss before tax of more than £3.1m for the six months ending September 30, 2022. But this followed a 39% surge in revenue to £29.8m over the same period. Direct-to-consumer sales grew 24% to £23m and wholesale revenue rocketed 139% to £6.9m as third-party retailer partnerships bore fruit.

With similar conditions affecting many of our etailers – namely higher return rates as shoppers returned to occasion wear where fit is harder to achieve buying online than the leisurewear years of the lockdowns, as well as supply chain problems – several of our top ranked businesses have achieved high productivity even as profits falter.

Pureplays versus multichannel retailers

Our highest ranked multichannel retailers include several big names, from Tesco (seventh) to Currys (16th) to Frasers Group (23rd), which have been careful to keep a close eye on their store estates over the past decade. Each has followed a constant process of right-sizing the estate, allowing them to achieve similar levels of productivity to smaller, often more agile operators.

While etailers outperformed in this year’s ranking following a strong 2021 for the channel, multichannel retailers put in a strong showing over Christmas 2022. At Sainsbury's Argos, for example, general merchandise sales grew 7.4% over the festive period, with Argos' sales up 7.1%. While some of this was down to Royal Mail strikes making click-and-collect more attractive to customers, people have well and truly returned to stores in their droves in 2022. Given these shifts, next year’s ranking may feature more multichannel names.

In addition, multichannel retailers are continuing to change the shape and size of their businesses, adapting in ways that may boost their staff productivity in future years. Sainsbury’s Argos, for instance, is in the process of ending its operations in Ireland, and is also closing standalone Argos stores in favour of adding more counters to Sainsbury’s supermarkets.

Other major multichannel players, such as Next (which didn’t make the ranking this year), are in the process of making significant —and often expensive — changes to their business models.

Next launched its Total Platform service in 2020, which allows third-party retailers to sell online using its ecommerce infrastructure. The return on its investment could start to have more of an impact on productivity in 2023 and into 2024, when, as chief executive Lord Wolfson has predicted, acceleration of the platform will become more dramatic.

Concurrently, Next is following an acquisitive strategy, with its most recent purchase being Joules in December 2022. Further acquisitions could see headcount and staff costs rise further — and it’s clearly a strategic priority, with the appointment of Jeremy Stakol as executive director and lead group investments, acquisitions and third-party brands director.

These large-scale business transformations don’t come cheap and many big-name multichannel retailers are in the middle of medium-to-long term change.

Marks & Spencer (also not in this years's top 30) is another brand undergoing change, following its ‘reshape for growth’ strategy that will see it reduce the number of full-line stores by 67 (from 247 to 180) by 2028. The aim is to shrink the estate to focus on the most productive stores.

Fashion’s productivity advantage

Fashion retailers are well represented this year — seven of the top 10 are fashion retailers, and they make up 19 of the top 30. 

While productivity relies on different things for different fashion businesses — Asos (first) will be more reliant on volume of sales for a strong ranking than luxury brand Watches of Switzerland (15th), for instance, where a lower number of high value sales and highly trained staff produces good results — fashion does lend itself to a number of productivity-encouraging initiatives. 

Many of these involve selling stock sourced from third parties. Marketplaces are common for fashion retailers, with Asos an obvious example, allowing it to sell stock made by others. BrandAlley, fourth on the list, sells items from other brands and retailers, which work with the site to sell slow-moving or excess stock. MandM Direct, eighth, operates a ‘wholesale clearance’ model, through which it acquires excess and end-of-line stock holdings from established brands.

For fashion retailers that do stock their own items, new initiatives are helping to increase sales without increasing the associated need for warehouse space or logistics costs.

Very Group, ninth, launched a stockless fulfilment model, known as dropship, with key brands such as Adidas and Reebok in October 2021, where customers receive stock directly from the brand partner. It has since expanded the model to other brands which allows it to increase range without additional stock investment.

Influence of pandemic behaviours

It is possible to see evidence of pandemic shopping behaviours in this year’s ranking.

Majestic Wine (17th), which already has a relatively high average transaction value owing to the nature of its product and business model, was further boosted in 2021 by customers continuing to drink more wine at home rather than going out.

Etailers across the board benefitted from the spike in online sales as customers took their time to return to stores, even after they started reopening.

Fashion retailers — from Asos to Gymshark (sixth) to Sweaty Betty (28th) — managed to take advantage of shoppers’ desire to buy more loungewear and leisurewear as they stayed at home more, and embraced comfort when they did go out.

And throughout, evidence of these retailers’ adaptability in the face of unprecedented uncertainty shone through — something we explore further in the next chapter.

Retail is an industry that is always in flux, but the pressure to adapt has been particularly acute over the past three years as almost constant waves of uncertainty and wider economic change have hit the sector.

In response, retailers are investing and reshaping their businesses in a variety of ways.

Tipping point of a tech transformation

Richard Lim, chief executive of consultancy Retail Economics, believes the sector is “on the cusp of a massive technological leap, driven by AI” which could boost productivity significantly in the coming years.

Productivity improvements in retail have been slow over the past decade, he says, with the sector failing to benefit to the same extent as others — such as manufacturing — from technological advancements. This comes down to the fact that it remains cheaper to employ people to undertake low-skilled work than it is to invest in AI and robots to do it.

“There is a trade-off between the cost of technology and the efficiency it provides, versus whether it’s commercially viable,” Lim says. But over the past few years, technology has become more affordable and wages are on the increase, helping to drive a broad shift towards technology.

“Margins are under pressure, labour costs and input costs are rising,” he says. “Retailers have to find more efficient ways of operating and technology is helping to find ways of doing that.”

Moving in this direction, Sainsbury's (ranked 29th) announced in February that it was to close two of its general merchandise depots by 2026 (Basildon and Heywood) affecting 1,400 jobs, as it rolled out a £90m investment in automation to modernise its logistics network at Daventry.

Chief executive Simon Roberts said that transforming the Sainsbury's/Argos network would "make our business simpler, more efficient and more effective for customers" and would "reduce costs, so we can invest where it will make the most impact for our customers".

Data advancements

There are myriad technologies that retailers are turning to, but for many in 2023, it means better use of data and, increasingly, investing in AI.

Chris Connon, senior principal at Slalom, a technology and digital transformation consultancy — clients of which include eBay, Microsoft and Travis Perkins — says better data visibility can be game changing when it comes to making the right decisions, and choosing the areas to focus on that are most likely to increase sales or boost efficiencies.

“Retailers have a lot of data but it is generally in silos. Getting better visibility can be a game-changer and can help identify the right course of action — the tech they need, how to support staff better, where to focus efforts. It also helps them identify which channels work and why.”

This tallies with the investment plans of some of the retailers included in our rankings.

Jon Bell, productivity director at Morrisons (24th in the top 30) says data is “exceptionally important” to the business. “We have worked really hard over the past two to three years to improve our data, and it will be informing a lot more of our decision making. It also enables us to think about things differently.”

However, the business is careful to combine data with what store teams are saying. “The art is how you marry that data with retail experience, customer insight, what colleagues are telling us, and then bringing it all together. It will become more important over the next 24 to 36 months.”

This use of data can manifest in a variety of different ways, from improving scheduling tools so the business has the right people in the right place, to helping inform on product range decisions, such as where products get sent, how often, and in what volumes.

As part of this shift Morrison's productivity team now sits alongside technology and supplier development, following a business reorganisation at the end of 2022.

“There are huge synergies between how we use technologies and data, how we order stock, how we flow stock, and how productive we are as a business so it made perfect sense to bring those teams together,” Bell says.

The Very Group is another retailer (9th in the rankings) to have invested early in AI. A chatbot was added to the website in the 2020 and this is now its largest customer care channel, handling 268,000 queries a month.

The bot has the ability to recognise if a customer is getting frustrated and will recommend they speak to a person instead if this is the case, meaning staff time is saved for more complex queries while simple problems are solved without human input.

Helen Watt, senior enterprise retail specialist at ServiceNow, adds: “E-tailers have the advantage of lower overheads and no shopfloor employees – their productivity levels are naturally higher. While technology is an important consideration for e-tailers looking to gain or maintain efficiency, it's especially important that stores with physical spaces and multichannel capabilities look to how technology can help mitigate the impact of naturally lower productivity levels. Harnessing technology to fill in the gaps in this way can make a very real contribution to a more efficient process overall.”

Reinventing retail careers

With wage inflation putting margins under pressure, and with shortages making it hard to fill certain roles, the age-old problem of keeping staff engaged in what are often seen as transient jobs has become more acute.

Boosting engagement is no mean feat. A survey by digital platform WorkL in November 2022 found that retail employees are some of the most unhappy and least engaged: just 58% said they were happy at work (compared with 64% on average) the lowest percentage of the industries surveyed.

Alastair Woods, a pay and employment partner at PwC, says the pandemic has not helped. “There is definitely some workforce fatigue following the two years of the pandemic with staff in all sectors feeling overworked and burned out. Retail workers along with those in hospitality and other frontline areas have perhaps felt this more acutely.”

Lim says a shift in mindset is needed. “Retail is still a low-paid sector in many areas. That is changing, but it’s something that has to be addressed by leadership teams because an unhappy workforce is an unproductive workforce.”

At Morrisons, Bell says employee engagement is seen as an opportunity and there is a focus on connecting staff with the business’s wider purpose. “We’ve just gone through a programme asking every colleague to think about what we could stop, start or continue. The way we think about that is working with purpose — colleagues help us identify and solve business problems. Getting rich feedback from colleagues is really powerful because they are closer to the customer and best placed to say that a system works really well or they need a new tool.”

Martin Schofield — a former technology and logistics director at Harvey Nichols who has also worked at Burberry and Debenhams, and who now runs consultancy firm Retail247 — says a mindset shift can help when it comes to staff engagement and productivity. “There can be an overemphasis on reducing costs, rather than selling more. I’ve sat in board meetings where we talk about how important customer service is to us, and then the next agenda item is whether we can afford to pay more than minimum wage. A good sales person will sell more and needs to be paid more.”

Incentivising people in the right way can help to turn retail from a job to a career, he adds — in luxury retail, increasing commission percentages for any sales made beyond targets can significantly boost sales.

Silvia Rindone, UK&I retail lead at EY, says this shift in mindset can be adapted to different forms of retail. “Retailers could look at how the most productive retailers, the continental discounters, are consistently improving their store colleague effectiveness through an ongoing improvement programme. The result is that staff are seen as an operational advantage for their business. While a low-cost model isn’t right for many retailers, understanding all colleague activities and exactly which drive customer benefits is critical.”

One continental discounter, Aldi ( which does not feature in our ranking because it does not split out staff costs) announced in February 2023 that it plans to hire 6,000 new store staff in the UK in 2023. The supermarket has 990 stores and about 40,000 staff across the UK, with store staff now paid a starting salary of £11 an hour across the UK and £12.75 within the M25 Greater London area.

ServiceNow enterprise retail specialist Charlotte Barnett concludes: “There’s no understating the importance of a positive employee experience. We can see businesses with higher engagement levels saw an 18% increase in sales productivity, a 10% boost in customer loyalty and a 23% increase in profitability. Investing in technology to boost staff engagement will have positive repercussions across all aspects of the retail organisation.”