In recent years, for a variety of reasons — operational changes, challenges in hiring and corporate expense cuts — some retail stores are noticeably light on staff.
Since the height of the pandemic, store operations have grown more complex, as omnichannel services like online fulfillment, pickup and delivery have become entrenched. Hiring in many areas is tougher, as wages have risen and unemployment has fallen. And some retailers, facing threats to margins and profits, have slashed their expenses, including their workforces, often replacing humans with tech.
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“A lot of stores run on much thinner staffing than they used to. Generally, there has been a reduction in headcount and labor hours,” GlobalData Managing Director Neil Saunders said by email. “Macy’s is a good example of this, as there are around 18% fewer staff per store than in 2019.”
It’s not just Macy’s. Employment across the sector is down and expected to decline further, according to the U.S. Bureau of Labor Statistics: As of March, retail unemployment was 5.1%, compared to 3.8% overall. In the next decade or so, the industry is set to lose nearly 77,000 workers, a 2% decline, compared to an expectation for 3% growth across all industries.
But running a store with a leaner staff is usually a mistake, and many retailers should beef up instead, even as they embrace new technologies for tasks previously done by humans, experts warn. For example, more than 40% of respondents to a survey by Theatro, which supplies communication tech for frontline workers, said that shopping in stores is “less enjoyable” than before the pandemic, and 60% of them blamed inadequate staffing levels.
Store staffing “is an easy area to cut as it has a very visible positive impact on the bottom line — the problem is that it causes a lot of invisible issues which negatively impact things like staff morale and customer satisfaction,” Saunders said. “Ultimately, this can harm the top line.”
The tech vs humans fallacy
As the world anticipates the implications of artificial intelligence across society, retail executives are already making plans to invest in AI. Machine learning, AI-enabled technologies and older tech like RFID are helping retailers speed up and refine tasks like inventory management, pricing and theft-detection that are slower and less accurate when left to humans alone.
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Then there is self-checkout, probably the most visible example of how stores have expanded their use of technology — the machines have become the dominant checkout format in grocery and have shown up at discounters, mass retailers and apparel retailers. But they’re also a good example of how humans aren’t easily replaced by technology, a lesson some companies, including Five Below and Target, have learned the hard way.
“There’s a major misalignment in terms of what customer expectations are when it comes to the self-service experience and what brands and organizations are actually delivering.”
Mario Matulich
President, Customer Management Practice
Consumers do appreciate self-service options, but have higher expectations around customer service since the pandemic, according to research from Theatro and Customer Management Practice, a research and advisory firm specializing in customer experience. Retailers that invest in those options without regard to how it affects their customers “will in fact see short-term gains, but end up with a pretty massive problem on their hands,” Customer Management Practice President Mario Matulich said by video conference.
“Our research has shown us that there’s a major misalignment in terms of what customer expectations are when it comes to the self-service experience and what brands and organizations are actually delivering,” he said.
There are often complications in deploying any technology, but especially when it’s designed for use by customers, according to Nikki Baird, vice president of strategy at Aptos Retail.
“If something goes wrong with the technology that’s oriented for the consumer, then who do they turn to for help?” she said by video conference. “They turn to the store employee, so it becomes the employee’s problem anyway. Have you really made anybody’s life better in those situations?”
Still, many store workers embrace technology, she also said, citing a Scandit study that found 40% of retail staff say their employers neglect their tech needs and about a quarter include tedious tasks and frustrating technology as a reason to leave their jobs. Bottom line, though, it’s a misunderstanding that AI and other tech means that stores can hire fewer workers, according to Jason Souloglou, CEO at SeeChange Technologies, which helps retailers improve efficiency and combat shrink.
Tractor Supply is one example of a retailer that has embraced AI to foster customer service, using it to alert store associates when lines are too long or help customers get information, CEO Hal Lawton said at the National Retail Federation’s Big Show earlier this year.
“AI frees up employees to conduct higher-value tasks and explore new growth opportunities by utilizing their creative, critical thinking and problem-solving skills,” Souloglou said by email.
Fewer workers, more problems
In 2022, unit labor costs (the total labor costs required to produce a unit of output), rose in retail overall, with annual productivity down for the first time since 2008, according to the most recent data from the Bureau of Labor Statistics. Most segments covered by Retail Dive, however, saw productivity gains, according to that report.
Meanwhile, retail work is now more elaborate, notes GlobalData’s Saunders.
“Activities like picking online orders, delivering curbside, and manning collection desks have absorbed many more hours,” he said. “In the case of stores like Walgreens and Target, having more items locked away is another burden on store staff. In a lot of cases this has created a labor crunch.”
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Store labor costs loom large on the bottom line, and therefore are a perennial target for cuts, according to Lee Peterson, executive vice president of thought leadership and marketing at WD Partners, who has had a long career in retail, starting with working at and managing stores.
“Since my inception in retail, the first number that gets cut, no matter what everybody says, is the payroll number,” he said by phone. “It’s like ‘Do we really need 100 people stocking the stores? Let’s make it 75 and see what happens.’ You can cut that number today, it’s just easy to do, effective immediately. And it’s a huge, huge mistake.”
Years ago, as a store manager running one retailer’s most productive location, Peterson got the call.
“I remember running the No. 1 store in the company and having them call me and say I had to cut my payroll by X amount,” he said. “I’m like, ‘You’ve got to be kidding me, I can’t cover the floor now. I can’t keep the store straight. I can’t wait on the customers. You’re telling me I have to cut the number?’”
“The first number that gets cut, no matter what everybody says, is the payroll number ... it’s just easy to do, effective immediately. And it’s a huge, huge mistake.”
Lee Peterson
Executive Vice President of Thought Leadership and Marketing, WD Partners
A store that lacks staff is vulnerable to theft and misses a key opportunity for customer engagement, experts say.
“Selling costs go up a little bit, but maybe shrink is going to go down to compensate for it,” Peterson said. “People are going to steal, so you need to think about that and work towards preventing it. One of the best ways, an unspoken advantage, is just having people on the floor. People will steal less if there’s people on the floor because if not, what do you think’s going to happen? It’s a free-for-all. It’s a bunch of shelves with stuff for thieves on them.”
Labor productivity is a major factor in cost containment, but retailers and brands should take into account the value of customer interactions in stores, Baird said.
“If you think about engagement — time spent, either at an employee level or even at a brand level — you can use that to understand cross-channel engagement,” she said. “Just how much time is this consumer spending with the brand? If they’re browsing my social media feed, great, that is a level of engagement. But if they’re standing in a store, and talking to a store associate, you can’t get more engagement than that. That should be the top level.”
What it takes to hire and keep store workers
A year ago, hiring platform Checkr found that 74% of retail workers were either looking for another job or thinking about it.
There are several possible reasons for this. Late last year, David Johnston, NRF vice president of asset protection and retail operations, told the House Homeland Security Committee’s Subcommittee on Counterterrorism, Law Enforcement and Intelligence that organized retail crime and fear of injury or death were major factors in the industry’s struggles to hire store workers. In written testimony to the committee, the group said there were 543,000 job openings in retail and “a clear shortage of workers,” characterizing retail jobs as “good-paying” and a “foundation for successful careers.”
But other research finds pay to be a major sticking point for store employees, while safety doesn’t show up as a top concern. In recent years, several major retailers, including Walmart and Target, have beefed up their starting pay to $15 per hour or so, and some jurisdictions are mandating even higher rates. Costco has made a point of being a leader in this area. Yet even those wages in many areas are still below a living wage.
In 2022, the real median earnings of retail salespeople was not statistically different from 2010, according to a December report from the U.S. Census Bureau. Cashiers were among the lowest paid, with median earnings of $27,174, nearly half of the median earnings for all full-time, year-round workers. Overall, the worker shortage in retail is due in part to low wages, according to staff placement firm Adecco’s Adia unit.
“I have two words for every retailer about associates: pay them,” WD’s Peterson told an NRF audience in January. “Pay them, pay them! The more you pay them, the better they will be, that’s just the bottom line.”
Peterson cites Costco as a retailer with well-compensated employees who like working there, and Ace Hardware as another with plenty of helpful staff in its stores.
But some retailers that have boosted their wages subsequently hired fewer people or shortened shifts in order to keep labor costs in check, undermining the appeal of those jobs and compromising store operations, experts say. Good pay is important in enticing and keeping retail workers, but they have other considerations as well. Understaffing itself is a reason why many leave retail jobs, according to the Scandit research. Otherwise, work-life balance, competitive salaries and access to easy-to-use tech are the top three drivers of employee loyalty in retail, per that report.
According to research from Customer Management Practice, compensation comes in fourth, behind, in order, a good manager, flexibility and career development opportunities. Peterson also believes that brand matters most to many prospective retail workers, giving cool brands a hiring advantage over uncool ones, he said by phone.
Retailers are aware that stores should be well staffed, according to Aptos’ Baird.
“I think it’s more a question of, ‘Where is this money going to come from?’” she said. “Part of how we got into where we are today, in terms of theft and self-checkout and all that fun stuff, is that wages went up, but labor budgets didn’t. The natural result of that is many retailers are staffing less, and something has got to give.”