What’s holding retailers back from making workforce investments?

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Feb 07, 2018
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Steve Rowen

Through a special arrangement, what follows is a summary of an article from Retail Paradox, RSR Research’s weekly analysis on emerging issues facing retailers, presented here for discussion.

When it comes to the retail workforce, everyone knows about management’s tendency to cling to the long-held notion that the industry must remain a low-wage, high-turnover affair. Nowhere is this more apparent than in RSR’s most recent benchmark report on what it will take to finally build a better workforce.

Within, retailers squarely lay the blame on employees being too needy, on customers holding unrealistic expectations, and in all but a few cases, on a model that simply doesn’t work well anymore. We are encouraged to see that in a few instances (“We’re asking employees to do too many things in stores” or “We expect our employees to learn on the job”) retailers accept a portion of the responsibility. But, by and large, they are far too eager to find excuses for why change has not and likely cannot happen in the present environment.

What’s more, the larger the retailer, the more likely they are to cling to these archetypal beliefs: 50 percent of mega retailers (those with more than $5B in annual revenue) say there is no budget to increase pay enough to be competitive with what potential employees expect; only 34 percent of retailers below the $1B mark say the same.

The report also identified a tremendous difference in what a workforce needs to be successful based on the primary product that retail segment sells. For grocery, the focus needs to shift from operations to selling. For apparel retailers, years of sweeping underinvestment in technology is coming home to roost. Those selling hard goods lack the budget to train their personnel to be experts. And for general merchants, they’ve fallen so far behind that they don’t even know how to prioritize the problems Amazon has hand-delivered them in just the past few years.

All of these inhibitors result from one simple fact: retailers have not faced the challenges specific to the products they sell in a meaningful way because they haven’t had to.

Will 2018 be the year to change all that?

DISCUSSION QUESTIONS: Do you think preconceived notions that retail has to be a “low-wage, high-turnover affair” is holding retailers back from investing in needed technology and worker salaries? Do you see signs that retailers are changing their attitudes about investing in their workforces? Is there an overriding inhibitor to investments in pay, training and in-store tech or does it vary greatly by channel?

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"Today the choice is clear; make the necessary changes or disappear."
"Retailers need a new model not new employees. The question they need to ask is, what on earth am I going to do with all of this unneeded real estate?"
"For the retail operations teams, much of this will not be a surprise -- they know good staff make a difference. "

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19 Comments on "What’s holding retailers back from making workforce investments?"


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Mark Ryski
BrainTrust

Many retailers have simply lost their way when it comes to staffing their stores. Many retail executives believe they can algorithm their way to success and leverage technology instead of investing in their workforce — this is utterly misguided. I work with retailers every day who squander their store traffic because they simply won’t apply enough labor in their stores to adequately serve the shoppers visiting, and then when their comp sales tank they blame it on declining store traffic. The biggest issue is management having the will to invest in their people. This is a management decision. I applaud RSR Research for continuing to bring this issue to the attention of the industry.

Ed Rosenbaum
BrainTrust

I agree. It is almost a Catch-22 situation. Stores need staffing to manage the traffic. But all of a recent sudden we rely on algorithms to make those decisions rather than someone to say “How may I assist you?”

Jon Polin
BrainTrust

Retailers are scared, and the banter coming from Wall Street and the media about retail fragility does not help. Bold retailers will make investments – in both people and technology – and, if need be, course correct later. Timid retailers will withhold investment into their business and die a slow (or fast) death.

Bob Amster
BrainTrust

I think that the majority of retail executives know that their store associates are underserved (paid, trained, etc.). They are having a problem determining from where they are going to take the funding to improve the situation. In an age where everyone agrees and touts customer-centricity, we must remember that the first point of contact for the customer is the store associate, and a retailer only gets one chance to make a first impression. Retailers do have to change the thinking and take action to treat their associates better, offer them a desirable place in which to work, pay them well and train them to be good at what they are expected to do. As the industry continues to focus on the importance of the customer, it will come to realize the importance of its store associates and find the funds to up the game.

Lyle Bunn (Ph.D. Hon)
Guest

Staff capability by some retailers is truly impressive (Nordstrom comes to mind immediately) while others are nowhere on the service scale, treating staff as stocking and checkout clerks. What a tragedy poor service provides to the investment in facilities and stock, which too many retailers see as the foundations of their business. There are other pillars in the structure, staffing being one of them.

Neil Saunders
BrainTrust
This all stems from the short-termism which is demanded by Wall Street. Investing in people is a long-term process which carries immediate cost but does not always deliver fast returns. It is understandably difficult for many retailers to square the circle. However, returns do eventually arrive. They get there in the form of better customer service, lower employee turnover, a more engaged workforce which helps grow and protect the business and a host of other ways. Ultimately, that delivers better performance than would otherwise be the case. If you doubt it, look at businesses that do invest in staff. The U.K.’s John Lewis Partnership. Market Basket. Container Store. Sure, they have their challenges and difficulties — but on a long-term trajectory, they perform well. All that said, while investment of money is critical, so is an investment of time. How many CEOs or managers go out and regularly listen to the shop floor staff? Not nearly enough. Doing so is critical as Marvin Ellison of J.C. Penney has proved. His regular contact with those at… Read more »
Steve Montgomery
BrainTrust

Many individuals in retail’s senior management have been there for some time. They are familiar with what got them there and apparently many believe that what worked in the past will work today and into the future. The world of retailing changed with the advent of e-commerce and the availability of technology as a differentiator. In order to move forward it means investing in people and technology.

The article mentions that retailers haven’t changed because they haven’t had to. That is true. Retailers may not have had to in the past. Today the choice is clear; make the necessary changes or disappear.

John Hyman
Guest
1 year 9 months ago

The decline in the customer experience predates the advent of e-commerce.

Stuart Jackson
Guest

I’m not sure it’s traditional notions holding the sector back. In my view it’s more of a case of not understanding the value of employee engagement. According to figures from Gallup, 51 percent of the U.S. workforce is not engaged, and a Workjam survey found that a paltry 17 percent of retail managers feel their employees are “very motivated and engaged.” That same study found that 55 percent of retail managers say the head office rarely or never recognizes hourly employees for doing good work. So basically, many retail employees don’t feel valued by their company; they don’t understand the brand’s mission and they have little time to drive forward the company’s vision. Engaging the workforce is not about throwing more money at them — though it helps. If retailers really want to see results they should be investing in employee engagement over and above everything else.

Kwan Lee
Guest
1 year 9 months ago

Changing the labor model is nearly impossible. A retailer will most likely to stick with the model that was used at the birth of the company. Employee-owned retailers — Costco and Trader Joe’s to name a few — focus on long-term employment, loyalty and good pay. Other retailers are happy with low pay and high turnover. Neither can switch midstream without ruining their business.

Tom Dougherty
BrainTrust

This should not be a discussion on wages and workers. Talking about that is akin to eating your leg to avoid starvation. Not only will it hurt but it won’t change the final outcome.

Retailers need a new model not new employees. The question they need to ask is, what on earth am I going to do with all of this unneeded real estate?

They won’t survive without cannibalizing their young. Only the heartiest will survive. But survival means not sticking their head in the sand.

Chris Petersen, PhD.
BrainTrust

Viewing employees as an operating expense rather than a strategic asset is rooted in the four Ps heritage of retail — Product, Price, Promotion and Place. With a product-centric heritage, senior management never really focused on the most important P — People. In the era of competing on product and price, people were viewed as a variable expense that could be cut to meet quarterly targets.

Apple was a leader in changing the paradigm. They paid higher salaries and provide intensive training before employees work on the floor. Their model has different levels of staff, which in turn creates a job path with more pay and responsibilities. The big difference in Apple stores is their retail model was initially, and still is, all about the customer experience not just the four Ps.

John Hyman
Guest
1 year 9 months ago
A long, long time ago, in a galaxy far, far away, being a salesperson in a store was a respected position. Salespeople were professionals, built success upon building relationships with their clientele and had a knowledge of the products and services that they sold. If you could study the individual employee cost to the revenue they generated the ROI would most likely astound you. Stores (and no doubt their bean-counters) lost track of this, preferring to see their employees as cattle or cost rather than the life’s blood that they were. These same bean-counters shifted dollars from people to advertising, put price over service and predictably caused the erosion of retailing largely through a total lack of user experience, a standardization of merchandise, and run-down and tired properties. Sadly, this point of view could be applied to these store’s approach to their buying and merchandising personnel as well. No wonder that speciality retailers stores are seeing more popularity (you should see what incubators are able to achieve in the OTR section of downtown Cincinnati). Some… Read more »
Lee Peterson
BrainTrust

The best way to make a difference between you and Amazon is with excellent customer service. Whether that’s in-store or otherwise, that factor is the driver of all loyalty. And customer service starts with good people. Missing in the question above is the “hiring” factor. Southwest has it right; hire for attitude and train for skill. And generally, good “people people” will cost you a little more in rate and training. But the long-term payoff should be brand element #1.

Ralph Jacobson
BrainTrust
As mentioned in the article, there is more than one issue to address here. Hourly wage earners in physical stores are getting raises of varying degrees in several large companies. However, in the U.S., where some 24 million of the 29 million businesses are “mom and pop” companies, raising wages from, say, $10 per hour to the widely-desired $15 per hour is a massive 50 percent increase in labor expense in a cost category that already is the largest internal cost outside of the cost of goods, themselves. So this is no small task for most any retailer. Technology is another aspect that many retailers have been slow to adopt. Exploring some of the newest store associate apps available can make everyone’s life easier, especially the shoppers. Bottom line, investments in any resource in-store have got to be prioritized by the leadership of the company. A rigorous definition of ROI for any of these investments is required to justify the expense. And more often than not, the ROI can be impressive when you factor in… Read more »
Peter Luff
BrainTrust

For the retail operations teams much of this will not be a surprise, they know good staff make a difference. However, they are battling against generic ratios such as comp per head, etc. Retail operations need to work harder with the data at their disposal and look at underlying trends and be able to demonstrate that by investing in staff they can improve conversion rates from hard-won traffic.

Working with our clients we have found this can create the argument to invest and grow. If the only tool used is less investment this ultimately is the road to oblivion. We encourage our retail operations clients to stand up and be counted by using facts that will show how investing will create growth.

Ricardo Belmar
BrainTrust
Fear — that’s what holds back retailers from investing in people. For many, it’s fear of long-term investment before seeing an ROI vs the short-term performance expectation shareholders have for the brand. It’s not a short-term path, even for companies who have started investing in tools for their store associates. Macy’s is a good example, where they have been systematically investing in associate apps for workforce management and while that has raised employee satisfaction, a fundamental question raised by shoppers remains “where do I find an associate?” Staffing levels are still not addressed properly in their stores. We’ve heard before that this will be the “year of the associate.” I hope this is finally the year as it cannot be any more clear to retailers — the fastest and best way for you to differentiate your in-store experience is with great customer service. That starts with well trained, happy associates. That has an impact in recruiting, hiring, and training. All of which need investment. Part of the problem for many retailers is how this investment… Read more »
Min-Jee Hwang
Guest

Investing in your workforce is a requirement, but takes a bit longer to see the ROI. As retailers invest in more employees to design and manage their eCommerce sites, brick and mortar can’t be left behind. With approximately 90% of retail sales happening in stores, it would be foolish not to give employees the pay, environment, and training they need. Some retailers might try to cut costs when it comes to employees, but this just leads to a frustrating experience for shoppers. As consumers, we all know the feeling of going into a store and either being faced with an employee that can’t answer any of our questions, or worse, searching through aisles for an employee and leaving to a competitor after we can’t find anyone within a reasonable amount of time. Creating and maintaining a top notch customer experience is costly, but it pays off in the long run.

William Hogben
BrainTrust

Retailers who invest more in staff need to see that pay out in increased productivity. Investing in staff retention and producing real career paths is only half of the puzzle — retailers also need to invest in better training, tools and technology to empower their newly motivated staff.

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Braintrust
"Today the choice is clear; make the necessary changes or disappear."
"Retailers need a new model not new employees. The question they need to ask is, what on earth am I going to do with all of this unneeded real estate?"
"For the retail operations teams, much of this will not be a surprise -- they know good staff make a difference. "

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