Photo: RetailWire
Has retail permanently downsized?
The number of people filing for first-time unemployment claims reached 1.416 million last week, an increase of 109,000 over the previous week, according to statistics released by the Department of Labor. How many of those worked in retail is not known, but there’s no doubt that the novel coronavirus pandemic has taken a heavy toll on the industry with little guarantee that many or even most of the jobs lost to date will ever come back.
The number of retail workers laid off or furloughed has left 1.9 million store associates looking for other ways to pay the bills. CNBC reports that 1.1 million of those currently unemployed are considered temporary, but when or if they will be brought back on the job remains to be seen.
The article points to the growing list of retailing chains that have filed for bankruptcy and announced store closings even as reports of others on the Chapter 11 brink continue to pop up. Headquarters and regional office positions have not been safe either, as evidenced by Macy’s recent announcement that it was cutting 3,900 corporate jobs.
Even in good news retail cases, the numbers show that the industry is far from its pre-pandemic employment levels. Best Buy, which preliminarily reported that its second quarter sales rose 2.5 percent overall (two percent in the U.S.) and that online sales were up 255 percent, has brought back roughly half the 51,000 employees, mostly part-timers, that it furloughed when it had to close stores to customers earlier this year.
Some retailers, for sure, have added jobs. Grocery chains and others deemed essential have had to staff up in the face of increased consumer demand for everyday staples and other products they sell.
Others moved workers, new and existing, into fulfillment and related positions as online sales shot up earlier in the pandemic. Consumers who turned to ordering more online have stuck to those routines either out of satisfaction with the new way of buying goods or to avoid contracting COVID-19 in states where the virus is spiking to record levels.
In an acceleration of moves being made prior to the outbreak, retailers are turning to increased automation and robotics in stores and warehouses. While advocates point to new jobs being created by this development, they do not typically account for the impact on hourly workers that are, for the most part, not qualified at present to move into technical positions.
- Unemployment Insurance Weekly Claims – Department of Labor
- Retail workforce could face permanent decline as companies take blow from pandemic, lockdowns – CNBC
- Struggling retailers lay off workers and pay millions in executive bonuses – RetailWire
- Best Buy connects strong sales to frontline worker performance – RetailWire
- Where can robots assist in retail’s COVID-19 efforts? – RetailWire
Discussion Questions
DISCUSSION QUESTIONS: Do you see retail industry employment returning to pre-pandemic levels any time soon? Will this experience make it more difficult for retailers to recruit workers interested in building a career in the years ahead?
Poll
BrainTrust
Dick Seesel
Principal, Retailing In Focus LLC
Phil Rubin
Founder, Grey Space Matters
Before the pandemic hit, the US had too much bad retail space. The distress caused by the lockdown has accelerated the drop out of that space, the vast majority of which will not return. Sadly, that will cause job losses in front line retail and, as such, we will likely see that part of the workforce shrink permanently.
However, there are two more positive caveats to this. First, new jobs will be created in different areas. Logistics, warehousing, fulfillment and so forth are all expanding; new innovative industries such as robotics will also create opportunities over the years ahead. Secondly, once we are through this period of disruption, there will be some retail expansion. New brands will grow and open stores, we will still see new shopping centers being built and expanded.
The present disruption is causing shifts. It does not spell the end of all development and progression in retail.
Breaking news: Neiman Marcus abandons Hudson Yards, so yes, instability is causing chaos for retail workers. Will the developers carve it up into office space or boutiques? One thing is sure: it was a painful decision for a store not even open a year and with great design cues.
Oh, let’s not forget for a minute Neiman Marcus Group paid $4 million in bonuses to Chairman and Chief Executive Geoffroy van Raemdonck in February and more than $4 million to other executives in the weeks before its May 7 bankruptcy filing. We’re not out of the woods yet.
I didn’t know they dropped out of Hudson Yards. Left Bal Harbour too, I think. Wow.
Yes, didn’t see that coming. They are weaker than expected.
But for every cloud, a clearing: Lord and Taylor isn’t dead … yet, anyway
Considering the positive news regarding vaccine trials in the past two weeks alone, it is realistic that by the end of Q1 2021 things will begin to return to some form of “normal.” While the level of retail employment will fluctuate considerably, and likely will trend down for the remainder of the year, the composition of employment is where the focus should be. The re-skilling and retooling needed for roles that will be need to be distributed from front-of-house in order to support the realities of modern retailing: fulfillment, BOPIS, reverse logistics etc. This will also vary considerably category to category.
Make no mistake: the pandemic has been a catastrophe for the retail industry, and we are nowhere near returning to normal. Many more prominent players will fall thanks to the bungling of our response.
Yes and yes. I believe the lingering effects of the pandemic will be felt for years as the industry recalibrates. Not only will there be fewer employment opportunities in general (notwithstanding pockets of growth), but I think working in retail — especially frontline — has become less desirable. Nothing lasts forever, but this industry will need years to recover.
Retail employment has been reduced for the long term. Retail businesses that were undergoing difficult times pre-pandemic have gone into bankruptcy and have closed or will close hundreds more stores. Those jobs are not coming back in retail so quickly. Some workers will retire, some will move onto another industry, some will come back into the retail industry working for the businesses that are in growth mode, but the total pie of jobs has shrunk permanently.
This all feels a lot more like “shrink and shift” than “bounce and return.” fewer physical stores, fewer malls, less square footage, more ecomm, more fulfillment, more last mile, more automation and efficiency = fewer overall retail jobs.
It had to happen. It was happening, slowly. Now the entire industry to moving quickly to the future. Less space, less people. The business that survive will be healthier and have a better future. We will match business structure with reality.
The over-expansion strategies of the 90s and mid-00s led to the overwhelming amount of retail space. As consumer behaviors shifted to a blend of digital and physical commerce, it isn’t a critical imperative to have the mall as the center of the shopping experience. We just heard that Neiman Marcus’s showcase department store of the future at Hudson Yards will be closed.
Before COVID-19, we were witnessing the compression of retail spaces, as companies have been rationalizing their store footprints, consolidating in certain markets, and closing unprofitable stores to preserve liquidity, save cash and drive revenues in the profitable stores. This is not a new development. The Great Acceleration caused by the pandemic has had catastrophic impacts on the retail industry and has led to mass store closures and bankruptcies.
As our normal shifts on a daily basis, it’s clear that in our pandemic/post-pandemic world that less is more.
No, retail employment is going to trend down for the foreseeable future. We were already over stored pre-pandemic (24 square feet of shopping center space per person in the US vs. 4 square feet in most of Europe). Economic pressures of Covid are accelerating the right-sizing of our retail footprint. We’ll probably see 25% of all retail stores in the US close over next 2 years.
On top of that, the trend in stores is to have fewer, higher skilled employees. The lowest value jobs (inventory, floor cleaning, and even checkout) are being replaced by automation. Retail wages are going up, but they expect those more expensive employees to be more customer facing.
So we have a perfect storm of fewer stores every year, and fewer employees per store. Given that retail is the largest private employer in the US, this will result in a significant economic shock.
Too many bad or over-stored chains has been the US story for a long time. No market is infinite, and we long since hit the upper edge of ours.
No way. While some retailers are adding associates on the front line, the amount of executives that have been laid off due to bankruptcies and liquidations is staggering. And from the wholesale side, there are layoffs of account executives/VP of sales positions as well. I think this is a story that few are talking about — what sort of retraining and new skill sets will be needed for these people to get close to the income levels that they were at for many years?
“Permanently” is a long time, but the economic havoc caused by the pandemic will take some recovery time. It’s clear that many of the stores closing locations or declaring bankruptcy were weakened even before the crisis — too many locations, too much debt, no sustainable reason for growing market share. The shift to e-commerce, and the decline of the mall, didn’t just start in mid-March.
I’m cautiously optimistic about treatments and vaccines, but I’m not sure they mean the return to “normal” retail business. There will be opportunities to pick up real estate, to be sure, but I think many customers have discovered what they need and what they don’t need over the past six months. They may be hungering for experiential spending more than “stuff.”
Unfortunately, no. We won’t see pre-pandemic employment soon, due to COVID-19’s Darwinian decluttering of retail companies and workers.
Grocery cashiers have evolved into self-checkout problem solvers. Warehouse workers are increasingly replaced by robots. Surviving sales associates have been redeployed to process the mountain of returned merchandise that piled up when stores remained shut. These trends show retail work is shifting toward tech and a smooth customer experience.
We still have a tsunami of job losses ahead of us, as the generosity of governments and landlords is finite. Yet people will continue to seek retail work, even if it’s part-time and it comes with higher frontline risks. Right now, some of the most fascinating roles are in automating retail to modernize operations for efficiency. These types of technical and managerial roles will attract retail professionals for the long term.
I don’t think anyone has a crystal ball. One thing is for sure, e-commerce got accelerated by few years of growth. So the delivery models will shift. The physical store print will likely further reduce, and jobs will shift more to customer service, fulfillment and returns. So “physical retail” will shrink, but overall retail may even grow.
This isn’t just about stores that closed because they needed to close, we’re beyond that. But permanently is a long time and no one knows how the retail stores/chains that survived will fare in the long run. We all hope they rebound, no matter how long it takes.
Retail employees at all levels have been hit hard. People seek corporate stability when job hunting so future recruiting will be tough, especially for mid to higher level positions. That being said, the entire job market isn’t looking so good right now. The affects of the pandemic will be with us long after it is over.
There is probably zero chance of retail employment returning to pre-pandemic levels. The US has been over-stored for years and there has been too much capital propping up irrelevant retailers that had no business surviving. It’s exacerbated by the giants and their evolution into truly mass merchants that are seemingly unstoppable; and e-commerce of course. Maybe we end up in a bar-bell scenario where there are the mega merchants and — one can hope — small ones that are local/glocal?
Sadly, the retail industry no longer needs brands like Sears and Kmart, JCP, Stage Stores and some or all of the Ascena brands. Then consider the future of Macy’s, Neiman Marcus and even Nordstrom, all of which are too large, at least in terms of doors.
I’d love to be wrong about this but the longer we are in pandemic-mode, not to mention recession/depression, the more likely the damage is permanent.
Just because the industry is smaller doesn’t necessarily mean it will be harder to recruit. It could turn out to be just the opposite, where the talent levels actually go up, which could only be good for the industry.
Will retail employment return to pre-pandemic levels any time soon? The answer is no. The retail and/or commerce landscape is changing. It was changing prior to COVID-19 but it is now accelerated as a result of the pandemic.
Understand, the customer is now in control and drives the journey and experience they want vs. the retailer “thinking” they are in control. That does mean you cannot NUDGE a customer or educate the customer regarding new “paths to purchase” but if the journey is not driving value for the customer, then the customer will not engage.
Brick and mortar is not going away and retail jobs will be restored. However, not at the same levels as before the pandemic. Two reasons: 1) digital commerce and optional fulfillment methods will continue to rise at accelerated rates, and 2) economic recovery is predicated on our ability to get this pandemic under control and put people back to work across all industries.
The thinking going through the minds of many retail employers is “how do I reduce my costs so I can stay alive during this time period?” As we all recall, the top expense for most retailers is labor — finding ways to reduce this expense can translate into actual profit for the time period. Retailers will find ways to reduce staff and increase productivity. In back office operations, retailers will look to automation. In storefront ops, it will be reducing staff and finding ways to extend staff duties.
The typical store employee is not highly skilled. High school students can operate a register or manage basic restocking, so as long as there is a demand for jobs, there won’t be a problem in recruiting workers. However, that doesn’t bring in top talent or committed talent to retailers who build from within. Whatever the case, COVID-19 has inflicted a scar on the retail industry which will take time to heal and needs to prevent further infection.
Retail will return (at some point in time), but in a very different form. Large legacy brands and mall/shopping spaces will be replaced by new concepts and multipurpose venues. Job roles will change to better serve customers and to increase efficiency that supports a leaner business model.
It’s becoming increasingly clear that retailers will need to fundamentally change the way they go to market. The surge in online shopping and finding alternative means to get goods to consumers (e.g. curbside pickup, turning entire stores into fulfillment centers) has left many retailers unprepared for this now, new-normal and has exposed their slow speed towards digital transformation. Yes, some technologies (e.g. digital shelf, AI/ML) may require new skill sets currently not well developed in frontline employees — which may lead to downsizing for some — but opportunities for others.
Ultimately, this is not about downsizing but about transformation.
The time for functional thinking about retail is over. A transformative mind-set is needed to ensure the industry is not only prepared to withstand the next life-altering event, but also to ensure the industry is prepared to meet evolved consumer demands that are being shaped, and likely will remain, once this pandemic is over.
Retailers with scale should start now in evaluating where they have been hit hardest and why. Then work strategically toward technology-enabled, sustainable solutions and necessary employee training/staffing to close those gaps if they want to be around in 5-10 years.
I rarely say “never,” however, I do see some lingering effects of the pandemic. Not all of them will be bad (e.g., increased online shopping, etc.), though. Traditional physical stores still sell 95+% of retail goods, so I do believe employment will return, with the exception of where automation is implemented.
Unfortunately, I don’t see the retail industry returning to pre-pandemic levels in the near future. Many retailers were already struggling and this pushed them over the edge or gave them the excuse to shut down stores, downsize, etc.
It will be years before retail industry employment returns to pre-pandemic levels. Smart retailers like Nordstrom are shifting sales associates to fulfillment roles for curbside or online orders.
The issue will be that unlike sales positions, fulfillment roles don’t allow for commissions and the wages are not living wages, so the incentive to work in retail will diminish. The quality of personnel and longevity with an employee will decline.
Permanent is a long time. I think brick and mortar store front had over inventoried in many areas and in the wrong format, this pandemic accelerated and forced a reset in those areas. Retail sales figures in total will recover as the employment figures recover, the type of spending and where it goes will change.
The pandemic has accelerated what was slowly happening to retailers anyway. The fact that it happened so fast, and in such a dramatic and impactful way to the frontline worker is the difficult thing we/they have to deal with. Will they bring all of them back? I don’t think so. Will new retailers pop up in their place to fill the void of those that don’t make it or permanently downsize? I absolutely believe so. Will the jobs and their requirements change in the meantime? No question about it.
Human beings are resilient, and we like to shop. Retailers need to step up their game and treat their employees like the valued, long term, contributing people that they are. Enable them, support them, give them career opportunities and think about them as the true pillars of your business. And don’t delay. If your top and bottom line need help, it doesn’t start with the product you’re selling, it starts with the people you employ.
The most successful retailers in the years ahead will lead the way on this and reap the rewards as a result. If ever there was a time to re-think your business and how you can get the best out of your people, it’s now.