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The Great Resignation

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In advance of the holiday season, the National Retail Federation (NRF) reported retailers will hire between 500,000 and 665,000 seasonal workers in November and December. At least some of retail’s 8.5 percent to 10.5 percent projected growth for holiday sales is contingent on retailers having enough employees to ring up the sales, stock the shelves and pull-and-pack the online orders.

Employee Shrink

Then the November 2021 Bureau of Labor Statistics reported jobs numbers dropped. Retail employment declined by 20,000 jobs in October from 15.45 million to 15.43 million in November. Job gains in food and beverage stores (+9,000), buildings materials and garden supply stores (+7,000) and non-store retailers (+4,000) partially offset losses in general merchandise stores (-20,000), clothing and fashion accessories stores (-18,000) and sporting goods, hobby, book and music stores (-9,000).

Overall, retail employment stands 176,000 lower in November 2021 than pre-pandemic February 2020. Even though the average weekly pay for a non-supervisory retail employee is now 13 percent higher than it was in February 2020 – $583 now versus $516 then – and 11 percent more on an hourly basis – $18.86/hour compared with $16.98/hour – retailers still can’t attract enough workers to fill their employment gap. The situation is even more pressing as national unemployment stands at 4.2 percent.

Great Retail Walkout

Throughout 2021, Boston Consulting Group (BCG) found some four percent of the retail workforce quit their jobs each month. And about half of them have no intention of returning to the industry. Today the quit rates in retail are up more than 25 percent compared to before the pandemic.

“The war for hourly talent is on and retail is losing,” says Nate Shenck, BCG’s head of retail in North America. “What’s different this year is there’s much more movement across different sectors – retail, travel, distribution, leisure, restaurants and the gig economy – than there has been in the past. It signals there’s an overall discontent among folks that left the hourly workforce.”

Shenck sees it as a far bigger issue for retail than just this holiday season, though it is bad enough with all the other headwinds retailers face to meet rising consumer demand. “The U.S. economy is currently operating above pre-Covid levels, but there’s still five million fewer hourly workers creating bottlenecks in the system that will take time to clear,” he continues.

Retailers need to explore ways to make jobs more satisfying and fulfilling and to provide employees a path to a sustainable career. Pay and benefits are one thing but there are other non-pay factors that retailers need to consider. It all comes down to changing the employee value proposition.

What’s happening here? The Great Resignation may be less about quitting jobs. There is a trend among next gens to job hop, moving from an unfulfilling job to something more meaningful – or more lucrative. Retail entry level jobs are not known to be inspiring career moves, along with entry level hospitality jobs.

According to Derek Thompson of The Atlantic, “The increase in quits is mostly about low-wage workers switching to better jobs in industries that are raising wages to grab new employees as fast as possible. From the quitter’s perspective, that’s a job hop. The low-wage service-sector economy is experiencing the equivalent of ‘free agency‘ in a professional sports league. That makes it more like the Big Switch than the Big Quit. The Great Resignation is mostly a dynamic ‘free agency’ period for low-income workers switching jobs to make more money, plus a moderate surge of early retirements in a pandemic.”

In any case, retailers are left shorthanded not just in not being able to fill their higher job attrition rates, but the workers they have too frequently call-out from their scheduled work times, creating even more challenges day-to-day.

“If you’re the customer, it clearly impacts customer service, both directly and indirectly,” Shenck says. “It translates into fewer open hours and retailers forced to shut specific locations with isolated pockets of staffing challenges. These employment challenges work all the way upstream into the supply chain. “Effectively, retail workers are saying, in the inimitable words of Johnny Paycheck, “Take this job and shove it.”

Fixing the Broken Retail Employment System

Retailers have tried to pull the typical levers to attract more workers, specifically paying higher hourly wages. But that clearly isn’t working. They’ve also resorted to sign-on bonuses and broadening the benefits plan to include educational and training benefits tied to how long employees stay with the retailer. These help, but they aren’t moving the needle fast enough either.

“Retailers need to explore ways to make jobs more satisfying and fulfilling and to provide employees a path to a sustainable career,” Shenck says. “Pay and benefits are one thing, and many studies show the challenge of making a living wage in retail. But there are a bunch of other non-pay factors that retailers need to consider. It all comes down to changing the employee value proposition.”

Women, in particular, have been making tracks out of retail. Since pre-pandemic February 2020, nearly 200,000 fewer women are employed in retail, dropping from 7.7 million to 7.5 million in November this year. Women are quitting retail faster than men partly because they have borne the brunt of childcare challenges caused by the pandemic shutdown of schools. But it’s not just Covid-related issues that are causing women to quit. Just like men, about half of retail job departures are driven by non-pay factors such as desire for more flexibility, better relationships with their manager and a defined career path.

“The real shift must happen in the other elements of the employee value proposition beyond pay and benefits,” Shenck believes. “And I am happy to report that it is these are the things the clients I’m working with are focused on. They are thinking about ways to make jobs interesting enough for people to stick around for the long run.”

Enhancing the Job Value Proposition

Retailers don’t necessarily need sweeping overhauls to change the job value proposition, but changes are needed.  Here are some thoughts:

Retailers need to assess the personal and professional qualities that lead to success in their organization and use that as the yardstick for making new hires. Given the current labor shortage – ZipRecruiter estimates there are over 11 million job openings nationwide and only about 6.9 million unemployed people who want to work – retailers may be inclined to take on any warm body who shows up. But that inevitably doesn’t work out and sets up a vicious cycle of hire, then fire, only to hire and fire again.

  • Hire Right

That churn cycle can lead to malaise and anxiety among other employees, including the valued and valuable ones. Such discontent is just as contagious in a corporate culture as the Delta/Omicron variants are among a group of people.

“Retailers need to be smarter about who they hire, making sure the fit is right to the culture of the store and the mission of the store,” Shenck advises.

  • Match Employees to the Task

Hourly retail employees are not interchangeable widgets or even production line cog- in-a-wheel workers who have to do the same task over and over again. Some retail workers thrive on customer interaction; others have a knack for organization and find satisfaction arranging merchandise.

It is incumbent on retail managers to align workers’ talents to the specific task. You can’t fit a square peg into a round hole, so employers must be clear upfront about the primary responsibilities of the job and take time to find candidates to match.

  • More Training, Starting with Managers

As important to employees as the work itself are their relationships with co-workers and most especially their managers. BCG’s research found employees’ relationships with managers is one of the most critical factors in why retail employees leave their current employers.“Better training is needed throughout the management pipeline, including district managers, area leaders and on down. They are not just managers, but need to be leaders,” Shenck says.

Bonobos, for one, understands the critical need for training throughout the corporate ranks. It offers programs specific to each staffing level, including management, performance management training, customer service and for staff associates training on How to Manage Up Well.

“We hire based on our core virtues, which are hugely responsible for helping us hone our company culture,” Tiffany Poppa, the company’s senior manager of employee experience, shared with Monster.com. “We believe it’s about rallying people who enjoy each other’s company and respect each other’s skill. The goal is to help our employees become better workers and to equip them with the skills they need to manage themselves and their teams,” she continued.

  • Drive Down Decision-Making

Much has been written about the failure of top-down, hierarchical structured management, yet most organizations still default to this model. For next gen employees, this is a non-starter.  Collaboration and having voice are job requirements. For retailers, command-and-control can be especially damaging since the whole purpose of retail is to meet customers’ needs. The higher employees rise in a retailer’s management ranks; the less direct customer contact they have.

On the other hand, employees with the most customer engagement – the floor-level associates – are organizationally the least empowered to make critical business decisions in the interest of the customer. That must change. “Retailers need to build a culture that empowers employees to make decisions on the spot for customers,” Shenck stress. “It’s personally so much more fulfilling if you have the ability to make the customer happy then and there.”

The Amazon Factor

For years retailers have been focused on elevating their value proposition to the customer. Its importance can’t be underestimated to drive traffic to the business, build sales and increase customer loyalty leading to repeat purchases. Amazon calls it “Customer Obsession.

But retailers also need to devote as much time, attention and resources to enhancing the value proposition for their employees. In the competitive battle for employees, just as in the battle for customers, having the right value proposition is critical to success.

Retail is ultimately a people not a product business. And the retailer with the best people will always win.

Note: This article originally appeared in The Robin Report.

 


 

About Pam Danziger: Pamela N. Danziger is an internationally recognized expert specializing in consumer insights for marketers targeting the affluent consumer segment. She is president of Unity Marketing, a boutique marketing consulting firm she founded in 1992 where she leads with research to provide brands with actionable insights into the minds of their most profitable customers.

She is also a founding partner in Retail Rescue, a firm that provides retailers with advice, mentoring and support in Marketing, Management, Merchandising, Operations, Service and Selling.

A prolific writer, she is the author of eight books including Shops that POP! 7 Steps to Extraordinary Retail Success, written about and for independent retailers. She is a contributor to The Robin Report and Forbes.com. Pam is frequently called on to share new insights with audiences and business leaders all over the world. Contact her at pam@unitymarketingonline.com.