Secret to compete
Brick-and-mortar retailers hoping to fend off Amazon.com need to deploy the one weapon that could set them apart
Brick-and-mortar retailers hoping to fend off Amazon.com need to deploy the one weapon that could set them apart: top-notch customer service, provided by actual humans.
But making that goal a reality relies on something they’ve not really invested in — well-trained employees with the kinds of wages and regular hours that make them want to stick around.
This illustrates traditional retailers’ dilemma. In the face of existential threats such as e-commerce and declining mall traffic, more generous pay might improve service. But it comes at the risk of spooking skeptical investors, who are already closely monitoring costs and margins.
“It’s obviously a delicate tightrope, where retailers that are watching their profit squeezed need to figure out where to cut,” said Simeon Siegel, an analyst at Instinet LLC. “Looking at the people who drive that business as an asset instead of a liability is difficult.”
As they boost payrolls during the crucial holiday shopping season, chains are sticking to low-wage and part-time positions. With unemployment at an almost 17-year low and a shortage of workers, it’s a tough time to change the long-established model.
While some major players, including Wal-Mart Inc. and Target Corp., have announced plans to increase pay, low wages persist. Workers say they can’t get the flexible hours they want, and hiring parttimers remains a common way out to avoid spending more on benefits and perks.
“It’s definitely a tighter job market, but the wage power is all with the employer,” said Scott Brown, chief economist at Raymond James Financial Inc. in St. Petersburg, Florida. Chains don’t see the need to increase compensation or add more full-time positions, he said. “Retail is usually seen as being low on the food chain, so you’re not going to see much pressure, even during the holidays.”
S. Mahmud, who works two retail jobs in New York, sees the industry as a temporary stop. She had hoped to earn extra cash this holiday season, but so far has been unable to do so.
“They don’t want to give you full-time,” said Mahmud, who asked that her first name not be used. “Although they need people, they’re distributing the hours.”
Neither of her employers is willing to move her up to a full-time position with regular benefits. Her wages have barely changed. The only concession she’s secured is better hours. She’s in a management training program after having completed a four-year degree, and doesn’t expect to always work in retail.
“Retailers say they’re trying to staff up, but the easiest thing to do would be to offer their part-time workers full-time jobs,” said Stuart Appelbaum, president of the Retail, Wholesale and Department Store Union.
Forty-seven percent of front-line employees — such as sales associates and cashiers — work part-time, according to a survey from the Fair Workweek Initiative. Part-time workers reported an hourly wage of 32 cents less than their fulltime colleagues, with hours fluctuating from 16 to 29 per week. One in three workers said they hadn’t received a raise in the last two years. That may need to change, and soon, if retailers mean what they say about creating memorable experiences to win over shoppers. This often requires a bigger workforce, such as an initiative by Macy’s that deploys 250 stylists to help shoppers create outfits. Nordstrom, meanwhile, has opened a store with no inventory: Customers work with fashion experts to build a wardrobe that then is shipped to their homes.
Some of the largest retailers, such as Target and Walmart, are also bumping pay higher to improve customer service and public perception. Others, such as the Container Store, are already known for comparatively higher wages, while Home Depot shares profit with workers and offers extensive training.But these aren’t indicative of a broader trend for the industry. Average hourly earnings in retail are now lagging behind overall worker pay by a record amount, according to Labor Department data. Even though some companies are boosting pay, the median U.S. retail sales employee salary was only $22,900 in 2016, according to the figures.
The industry also faces an unstable workforce: Retailers’ September turnover rate was 4.2 percent, indicating they lose about 50 percent of their sales staff over a full year.