All industries are grappling with labor shortages and the retail sector is no different. Most retailers have already started ramping up for the holiday shopping season as consumers begin their holiday spending earlier and earlier each year. For instance, at the end of September, according to Bloomberg, Macy’s anticipated hiring 48,000 holiday employees and Walmart planned to hire 20,000 workers for its supply chain division. Even with aggressive hiring plans, the U.S. retail industry is expected to have a shortage of roughly 350,000 workers heading into the final months of the year, according to Salesforce.
Many retailers are increasing entry-level hourly wages to entice workers. For example, Costco raised its minimum wage to $17 an hour at the end of October, this on top of a dollar-an-hour increase in February. In general, average hourly earnings in retail trade have been on the rise according to data from the Bureau of Labor Statistics. Overall, there is approximately a 5.3% increase in retail employee compensation year over year. Rapidly rising wages are causing inflation concerns as labor cost growth is the fastest in more than two decades, according to Anna Wong, chief U.S. economist for Bloomberg Economics.
Wages matter, but so does training
Many middle market retailers, however, struggle to increase wages as they do not have the added cash flow, especially due to current inventories trapped in containers and transportation costs at historic highs.
Turnover and training are also costly so employers need to be creative in order to hire and retain top talent. Training is important as the role of store employees has changed significantly post pandemic. As retailers expand omnichannel options, store employees need to be both in store and online customer service experts. Consumers are demanding personal and meaningful experiences as well. This can put a significant burden on current employees where stores are short staffed and holiday stress can be high. If training and retention is done right, it can lead to better job satisfaction and opportunities for advancement for employees.
Labor in the retail sector will continue to be costly but will pale in comparison to the damaged customer loyalty if employees are not properly compensated and trained.
Look for additional insights next week as we continue our five-part consumer products holiday season countdown series.