The State of Labor in Retailing
Labor Day is almost here and the retail industry’s focus is on sales this weekend and not the original intention of the holiday — to celebrate American labor and its historic role in making the nation great.
So what is the state of labor in the retailing business?
The industry, like others, has its problems, with a workforce largely made up of part-timers who work terrible hours for low wages and few benefits. The combination of unmotivated and sometimes poorly-trained workers and managers under extreme pressure to succeed has created issues in some stores.
Retailing also suffers from an upper management disconnect. As covered many times on RetailWire, top executives often do not have a true understanding of what workers deal with in stores. Unlike in the past, many top execs are more likely to come from MBA programs than up from the ranks.
Like other industries, compensation of upper tier executives has grown at an exponentially faster rate than front line workers. A few businesses — Whole Foods comes to mind — have taken steps to tie executive compensation to what workers within the chain make, although even here the c-suite is growing at a faster rate than store employees.
In 2006, Whole Foods increased its the salary cap from 14 times the average pay of all full-time employees to 19. That number was nearly twice the cap (10x) Whole Foods had in place in 1999. The average hourly wage for full-timers at the chain between 1999 and 2006 grew from $12.36 to $15.38.
The debate over benefits and how to control health care costs remains contentious within the industry. Major grocery chains in Southern California and the United Food and Commercial Workers seem, almost unbelievably to outsiders, on the brink of another work stoppage. An employer lockout followed by a strike in 2003/2004 was extremely damaging to Albertsons, Kroger and Safeway with the chains estimated to have lost $2 billion, not to mention the hardship faced by workers not pulling in their regular paychecks.
Not all labor relationships within retailing suffer from animosity or, perhaps worse, apathy. There are many broad exceptions: Costco, Container Store, Trader Joe’s, Wegmans, Zappos and others are often given high marks for employer/employee relationships.
Ultimately, however, many retail businesses see and treat workers as expenses to be contained and not assets to be exploited. They do this even as they proclaim, almost in unison, that their front-line workers are most important to performance.
Discussion Questions
Discussion Questions: What do you think is the state of labor in the retailing industry today? How would you fix it, assuming you believe there is something that needs to be fixed?
Unfortunately I agree that in too many cases, retail labor is treated as an expense and not an asset. The skills sets that are required are undervalued by many in the c-suite. The mantra seems to be the front-line workers as simply something we have to have and if we lose one another will walk in the door.
There are no easy fixes and each situation is unique. One thing that I believe would help is if those in the c-suite had to actually periodically work front-line. I don’t mean drop by a store and do it for an hour or two to show that they are regular people – I find this kind of “dipping” to be very dangerous. People think they understand based on their very brief exposure but they really don’t. I mean do it for a week and more than once in their career (people have a tendency to forget and the requirements of the jobs do change).
The article did a great job of summing up the state of labor: Low pay, high pressure, few benefits, with managers that don’t understand retail. Most college grads see retail as a stepping stone to a “real job” outside the industry. I hate to be pessimistic, but I don’t see this changing anytime soon. Hats off to the few chains that treat their employees well.
Let’s omit The Container Store, Costco and Zappos from the conversation. They are certainly the exception that increases all the necessary statistical data to make retail labor numbers look good.
The article’s third paragraph summed up the state of labor in retail as good as anything we can do here. Part time, low wages, poor hours and few benefits. What more can we say? Go to any large retailer and simply watch the employees go about their work. See how many are enthusiastic. My guess is the numbers are low and dropping from there.
I don’t think there is something inherently “wrong” with retail as a career choice among employees or prospective employees. Apple, Nordstrom, Starbucks and other places have an almost “coolness” to them as places to work. I think the issue is the level of investment or commitment management makes to employees and that they make in return.
How often have we heard executives bemoan the high cost of training employees – but then complain about turnover being so high and how it is so transient? How many employers actually “cut their employees in” by providing bonuses that the employees can actually impact and achieve through their direct actions (not: if the stock price goes up, you get a token kicker), how many store managers and HQ-based executives spend as little time as possible with store personnel on the “selling floor” to model behaviors, mentor, coach, and evaluate personnel?
There are challenges to be solved with the labor issue — but it is not insurmountable. Hard to do — yes. Impossible — only if we choose to make it so.
The economic distance between the average retail worker and the customers they’re asked to serve has never been wider. At a median hourly wage of $9.34/hr, the average retail employee is living close to or below the poverty line depending on their home state and family obligations.
Meanwhile, we hear survey after survey citing how poor customer service is.
It’s simple math. You get what you pay for.
Working at retail is a hard job, and those that do it or have done it, know it. With the unemployment rate at such a high level, it is assumed by many chains that attracting workers is easy. And, in order to satisfy Wall Street, it is easier to take broad strokes like cutting inventory, closing marginal stores, running extra sales and promotions, etc., than it is to take the time and effort needed to improve performance and job satisfaction levels on a one-on-one basis.
The story says it all, and the tragedy is that the store associates are totally, utterly and completely a retailer’s face to its customer base, and how they act and interact with shoppers determines in large part how customers feel about that store. Deployment of all the social media in the world backed up by beautiful websites isn’t going to alter this. The story is also correct in saying retail management does recognize the importance of store associates but then, quite frankly, treats them merely as chips to be contained and economically expensed. Is there a solution for the low margin channels in retailing such as supermarkets, mass merchants and drug stores? In a labor market wealthy with candidates (zero job growth reported this morning, so unemployment continues at over 9%), it would seem an ideal time to be able to pick and choose competent and willing employees to make store teams hum the way they should.
I don’t want to say the state of labor in retailing is bad, but it has changed and evolved in a negative way over the last few years. Many big and small brands have forgotten what the 2 essential elements in retailing are: product and people. We’ve done well in the product department. Bigger, brighter stores, more product depth, shinier packages, attractive pricing, etc. But on the people end of things, it would seem all resources go towards the product and not the individuals charged with selling the product. I always ask this of any retailer: What if your cashier could sell one more item to your customer. How much additional revenue would that add to the bottom line?
A few retailers get it. Most don’t, so there is no real investment in the person wearing the name tag or apron. Remember when Home Depot was the do it yourselfer’s paradise and you could walk in and find someone who could actually help you install a new hot water tank? The focus for many years was on products and not service at HD and they have suffered. Or what about Sam Walton’s preachings about how people are everything. Do you think the Walmart of today feels that way? Investment in the frontlines is final piece of the puzzle.
All you need to do is remember that most retailers/executives do not look at front-line employees as a place where they need to make a significant investment. They are seen as a disposable, easy-to-replace commodity. In today’s labor market that is true, especially if you are racing to the bottom to see who can deliver the worst experience at the lowest cost.
As the article points out, there are some exceptions. The problem is they are the exceptions and that is why they stand out.
This is one of the fundamental tensions in retailing — pitting operational cost savings against the achievement of excellent store performance. As long as the issue is framed in terms of mutually exclusive goals, there is no chance of satisfactory resolution. Employees rightly feel set up for daily frustration, while large chains fret over why their vaunted scale economies fail to deliver higher net profits.
Recently I’ve been reading some academic papers by one of the most cogent thinkers on this topic that I have yet to encounter. Her name is Dr. Zeynep Ton, and she has been a professor at Harvard Business School and more recently the Sloan School of Management at MIT. Find some of her HBS publications here: http://hbswk.hbs.edu/faculty/zton.html
Dr. Ton’s work focuses on the challenge of optimizing labor at retail and on how investment in service quality and store-level conformance often pays off financially for best-of-breed organizations.
I believe work like hers can constitute the basis of a new kind of dialog about store labor practices — one that focuses on managing performance outcomes and aligning the interests of workers with those of the organization.
For this to happen, “command and control” must yield a little bit to “define goals and transparently evaluate outcomes.” Top management may hate this at first, but for 19x the average FTE in salary, they can afford to take on a bit of professional challenge.
Well THAT was certainly an uplifting piece (though sadly I don’t think I can disagree with a single word that was written). And I’m not sure most people would really prefer being an “asset to be exploited” rather than “an expense to be contained”…but they might just like being seen as a person, and rewarded for their accomplishment(s).
As a career-long retail leader, this subject never fails to frustrate me. The easy excuse of the poor state of labor in retailing is the dominance of short-term financial metrics driving bad leadership at the shop floor level. The constant demand of immediate results that beat market expectations forces leaders to cut investment in long-term success strategies: training and development, benefits that drive employee loyalty and performance, and time spent in efforts to intentionally engage line workers.
However, any leader in any retail organization can decide today to focus on loving their teams and provide simple development opportunities and engagement activities. I’ve seen it personally over and over again. Having said this, those retailers who continue to push their leaders to not focus on positive efforts to engage their staff will continue to decline into irrelevance. Why? Most operational leaders do not have the character strength to counter poor senior leadership.
How to fix this? Support those retailers who get it — Container Store, Zappos, Costco and others. Their financial results will continue to strengthen their market share and eventually kill off lesser contenders. The evolution of retail, happening in front of us.