Rough Road Ahead For Retail Employers And Employees Next Year

A year ago, the retailers had one overwhelming employment problem: they couldn’t find enough people to work in their stores. Employees were leaving retail employers in droves and not enough people were queuing up to fill the vacancies.

Retail job openings were up nearly 40% in December 2021 over 2019 levels. And last year, the pace of people quitting retail employment rose at about the same rate (37.9%) over 2020, according to the Bureau of Labor Statistics. Layoffs and discharges were down 59%.

Back then, in assessing the outlook for retail in 2022, Deloitte’s Rod Sides wrote, “Currently, the biggest pain point for retailers is at the store level, and 74% [of 50 major retail executives surveyed] expect shortages in customer-facing positioning.”

How quickly the ground has shifted. Now there are early warning signs that retail employers will confront a different problem in 2023.

The direction of change is revealed in prospects for seasonal retail employment this year. It could be down as much as one-third based on the National Retail Federation’s most conservative estimate.

WalmartWMT
, for example, dropped its seasonal hiring plans from 170,000 last year to 40,000 this, according to Coresight Research. And while AmazonAMZN
intends to hire as many seasonal staff this year as last, some 150,000 workers, it also announced layoffs affecting upwards of 10,000 headquarters employees, focused on retail operations and its device divisions.

Through October 2022, retailers have barely added any new employees, with a net change of only .2% in the last six months and none were added from September to October, seasonally adjusted.

Layoffs In The Offing

Already retail layoffs have begun. Amidst widespread reductions in corporate guidance, WayfairW
, Party City, Walmart, Best BuyBBY
, Glossier, Allbirds, Warby Parker, Reebok, Gap, Shopify and others have announced plans to cut staff.

So far, those reductions are mostly to headquarters staff, but that won’t be nearly enough if the economy’s other shoe drops as expected next year.

“The problem is cutting headquarters staff doesn’t move the needle,” Sides said. “To stem the tide from a profit perspective, retailers must look to the field organization to make meaningful cost reductions. That’s where all the cost is.”

Nobody welcomes layoffs, employers and employees alike, and they may create more problems than they solve.

“Retailers are already running fairly lean,” he observed. “How can retailers deliver the customer service promised and do it in a cost-effective manner with even fewer people? When customers are unhappy in the store, they go home and order it online.”

It becomes a vicious circle. Shoppers are turned off if they can’t find what they want in the store or get treated poorly from a customer service perspective – all things at risk with understaffed stores.

“If you don’t have enough labor, retailers are going to drive people away from the store and push them online, not because they don’t want to buy there but because they want a better experience,” he explained.

Retail Employees Dissatisfied

Retailers have long struggled to make employment an attractive career option, and it is only getting worse. “It’s a tough labor market regardless and the younger generations are exploring other career paths, unlike the older generations that often got started working in retail,” Sides said.

Dissatisfied retail employees may see a push out the door as more of a blessing than a curse. A study conducted by Axonify and Nudge on the state of “deskless workers” found 40% of retail frontline employees want to quit their jobs, up from 37% in 2021.

Laid-off employees can take their severance checks and unemployment benefits and run, not walk, to the local community college or technical school to learn new skills to land more personally satisfying and potentially higher-paying jobs.

Low wages and lack of benefits are a perennial pain point for frontline deskless workers, but they also feel little to no control of their work schedules, inconsistent hours and lack of training to move up the ladder.

“They are coming to work scared, overworked and burned out,” Axonify’s report revealed. It also uncovered that deskless workers know what is required of them and want to do their job, but there are too many burdensome and initiative-zapping hurdles in their way.

Retailers have been operating with limited frontline staff over the past three years, arguably the most stress-filled and challenging time for everyone in retail, but most especially those with direct face-to-face customer contact.

During and after, workers on the sales floor were required to pick up new tasks, like buy-online-pickup-in-store, while still trying to perform the old ones. Extreme levels of multi-tasking became the norm, resulting in more worker stress and ultimately reduced productivity.

Deloitte’s Sides suggests retailers have backed themselves into a corner where their frontline employees are concerned. And that’s a very uncomfortable place for retailers to be, since they ultimately depend upon their frontlines to serve the customers and keep them coming back.

“For the last 30 years I’ve worked in retail, we haven’t seen a fundamental shift in the ways in which store labor is allocated and scheduled. Most retail innovation happened online, leaving stores to catch up,” he observed.

Service Model Innovation Needed

Sides sees an opportunity for retailers to lean into the burgeoning gig-labor force to evolve its service business model.

“There’s an opportunity for third parties to be contracted to receive a truck, prep merchandise for the floor and get it moved onto the shelves,” Sides said.

“And already some of the last-mile services, like Instacart, are doing some level of picking for customer orders; maybe they and other third parties can do more so store staff can devote their efforts to serving the customers in the store,” he continued.

He also points to Brookfield Property Partners providing some of the picking and shipping responsibilities on behalf of their mall tenants. “They stepped into the labor void and essentially created a concierge service.”

Self-checkout is another area for optimization of the in-store workforce. But some retailers do it well, while others need to make it easier for shoppers to navigate.

“Self-checkout can create friction for customers. One local grocery store in my neighborhood actually removed it from its store,” he noted.

“It’s time for service model innovation at retail,” Sides concludes. “Retailers are operating in a difficult environment and much depends on how well holiday goes. Right now, retailers have too much capital deployed against inventory and if that isn’t cleared, it will push them to take more drastic cost-cutting actions in the first quarter.”