The Retail Workforce Is About To Go Through Some Radical Changes

Brick and mortar retail has done far better during the pandemic than most experts predicted. It was easy to feel like the potential for prolonged lockdowns would mean a hastened end to physical retail when there was a greater population of wild animals in the shopping district than people. However, while still facing a lot of uncertainty from the delta surge and the delay of offices returning to full staff, the retail store is still here and it’s doing… okay.

In fact, physical retail looks to bounce back from the pandemic even before the pandemic is officially over – already in 2021, more US retailers plan to open more stores than close them. Coresight Research reports that the rate of store closures has slowed for the first time this year, in part because of the slowed pace of retail bankruptcies, and store openings are up nearly 42% over this time last year. To be fair, many of those store openings are in the discount category – the low price retailers with a heavy essential goods assortment. But it is still a far cry from the end of the retail store.

And store openings are back on the agenda as a growth strategy. The stores might be smaller and more targeted locally, but that raises the opportunity to open many more of them.

All of this is great news – with one catch. Who will staff them? 

It’s Hard to Find People – And It’s About To Get Harder

Front-line workers in retail have faced an unprecedented set of pandemic-driven challenges, from having to make personal choices about whether to risk their health in order to show up to work, to policing public health guidelines, to dealing with requests for long hours and overtime all while managing a stressed public that has, unfortunately, been taking that stress out on store employees.

It should be no surprise that retail employees have been quitting in droves. In a market of ten million job openings, nearly one million of those are in retail. And it’s about to get worse – holiday hiring needs are just around the corner. Retailers added 702,000 seasonal jobs in 2019, but then went on to add over 788,000 in 2020, even in the midst of the Covid winter wave. The National Retail Federation has already raised its overall forecast for retail sales in 2021, so even with continued pandemic uncertainty and the delta surge, it’s likely retailers could beat the 2020 seasonal hiring numbers in 2021 – if they can find workers.

And find them they can’t. In July 2021, a Korn Ferry survey found that 51% of retailers surveyed already report having moderate trouble hiring store employees, and 36% report “significant challenges.” And a Salesforce study projects that retailers will be short as many as 350,000 workers heading into peak holiday selling.

All The Stops – And More

Retailers are starting to look very desperate right now, as holiday hiring needs loom large. Some savvy retailers reached out to summer workers before they returned to school to try to lock them in for holiday help – offering retention bonuses for as little as four weeks worth of work during November or December, if employees keep their word. Chipotle and Target are apparently accepting applications via TikTok, and Denny’s will give job applicants a free breakfast. A McDonald’s in Oregon is actively recruiting 14-year-olds. 

Some retailers are turning to automation. For example, DSW announced plans around self-checkout, and Amazon just strong-armed its Whole Foods business into enthusiastically embracing its “Just Walk Out” technology. Not every retailer is suited for automation at checkout – DSW has a vested interest in making sure the shoes in the box match each other and that the shoes in the box belong in that box (with the barcode on the side that determines the price charged).

And some retailers are getting creative with perks. From Target handing out spot bonuses to Walmart and Lululemon offering mental health benefits, to Amazon funding college tuition, to restaurants closing in order to give employees a break, retailers are trying to balance ways to retain workers against wage hikes, which build in structural costs that are more difficult to roll back when the pandemic is over.

How well is that working? Considering that already this year several retailers, including Walmart, CVS, and Walgreens have had to hike wages to as high as $15 per hour to start, it seems that the answer is “not well.” Cash is still king in this tight labor market. The Korn Ferry survey of retailers found that 65% of retail executives have already increased their starting rate for store employees this year, or plan to increase it before the end of the year.

And Then There’s Best Buy

There’s a lot of advice out there about how to hire and retain workers in a tough market. Harvard Business Review recommends that companies “break market norms” by offering outsize starting wages. However, when the market norm has shifted so radically that companies are using TikTok, 14-year-old recruiting, and $15-20 per hour to attract workers, paying big starting wages or bonuses no longer seems like something so extreme. 

It looks like Best Buy has taken this current situation to heart. The company has increased the percent of employees who are full time workers and is investing in things like home theater setup expertise. Rather than treating employees as disposable, the company is making them a central part of keeping stores relevant.

Other recent changes: drafting employees as delivery drivers, with an emphasis on creating local community connections, or building a warehouse that serves as a virtual store, where online shoppers can connect directly with an individual who can walk around and show off products in a retail store context. 

Holiday And Beyond

If holiday hiring gives retailers a shot at attracting nearly a million seasonal workers, it also gives them a shot at a million regular workers – at a time when retailers are already down nearly a million workers to begin with. It would seem that strategies that help entice seasonal workers to stay on after the holidays might help retailers fill their employment gaps. However, seasonal workers are often a different breed – not motivated by long-term employment, so much as the discounts and cash that helps fund their own holiday spending. 

But like everything else, the pandemic has accelerated labor trends that were already in play. Retail stores faced a questionable future before the pandemic, and they needed a strategic revamp long before the pandemic forced online shopping to take a hockey stick at stores’ expense. 

Part of the challenge with stores has been what has happened to store labor. Retailers have pulled an enormous amount of labor out of stores over the last forty years, and the last twenty years in particular have seen a drastic reduction in full time (with benefits) jobs, labor hour cuts, the introduction of on-call work, and in general just an erosion of the expertise available to customers in stores. Retailers have painted themselves into a low-wage, low-skill corner. Some of that erosion was driven by online competition – store employees just can’t keep up with all of the rich information about products available online. But some of it was self-inflicted. Retailers have long struggled to figure out how to provide better information to store associates, resisting things like mobile devices for store associates as too expensive or too difficult to implement.

Retailers found themselves coming into the pandemic with stores understaffed, under-trained, and under-resourced. And now that labor is hard to find, retailers are paying more to staff stores, and realizing that they need to correspondingly expect more from those store associates. The value of product knowledge has not been completely eroded by online, and store associates still need to play a crucial role in upsell, cross-sell, curation, and “expert” level expertise in the goods they sell. 

The Bottom Line

So what does the future of retail labor look like? The days of low-skill, low-wage retail may be gone forever. And this great experiment with retail wages and the enormous amount of pressure on wages, perks, and benefits is a chance to see whether paying more actually nets retailers more – at a time when stores need to be so much more than just a place to acquire and pay for goods.

And technology will be more important than ever, not just for managing employees but for enabling them. It is increasingly difficult for a store employee to do their job without technology. Between online orders coming into the store for pickup or shipping, or online returns coming to stores to be processed for credit to the consumer, or the increasing role of online influencer while in the store – as companies like Nordstrom introduce livestreaming in stores to reach online shoppers – the traditional role of the store employee as someone just ringing cash and carry sales is over.