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In brief
The retail sector is among those hardest hit by the ongoing, unprecedented labor shortage. Retail executives grappling with the dual problems of ballooning wages and a historically low labor supply are finding that traditional recruitment, retention and work-saving strategies aren’t enough to fill their need for customer-facing workers. They may need to consider some of the unconventional approaches that a handful of our retail clients have employed.
Despite the Bureau of Labor Statistics (BLS) reporting a nearly 7% year-over-year increase in the average retail wage to $19.20/hour (December 2021), low job satisfaction and competing opportunities continue to drive retail workers' decisions to leave for better paying jobs.
How EY can help
EY-Parthenon professionals recognize that CEOs and business leaders are tasked with achieving maximum value for their organizations’ stakeholders in this transformative age. We challenge assumptions to design and deliver strategies that help improve profitability and long-term value.
Read moreIn response, some retailers are trying novel ideas to ease the labor strain while simultaneously working to ensure customers enjoy their in-store shopping experience as they return to brick-and-mortar stores post pandemic. Maintaining the right staffing levels can be critical to preserving the recent bounce-back from e-commerce, especially as consumers now rate their experience as second only to price in influencing their purchasing decisions, according to the EY Future Consumer Index.
One of the most effective strategies involves a national retailer that’s taking an all-hands-on-deck approach to its labor challenge. With thousands of locations and tens of thousands of open store positions, executives broadened their finance-driven quarterly footprint enhancement process to include staff retention and relocation to other stores as part of the exercise.
When the company assessed stores for potential closures, EY-Parthenon professionals helped leaders expand the analysis lens aperture from “poorly performing stores” to “net positive events” by factoring in staffing needs and retention objectives from the outset.
With careful planning; intentional management; and collaboration between finance, operations and HR leaders, the retailer achieved extraordinary enterprise-wide results:
These results are atypical of a footprint enhancement effort that’s not designed with the goal of talent retention at its core. To unlock significant hidden value from within an existing process, here are three key pillars for getting the labor component right:
When evaluating a store for potential closure, financial teams work closely with HR and talent to include elements that identify labor opportunities, in addition to the financial metrics that typically drive closure decisions. They set the stage by assessing which neighboring stores have labor gaps, incorporating specific union considerations and requirements for that geography, and then matching employees from closing locations to alternative stores nearby.
This advanced, cross-functional analysis may also reveal needs and opportunities that would otherwise be overlooked. Perhaps a store that would be closed in six months based solely on performance would be closed sooner if labor gaps could be solved in nearby profitable stores. A specific metro area with severe talent shortages may also require coordination across a broader group of field leaders to identify where employees from a closing location can be leveraged.
Keep employees informed through proactive, direct and honest communications to make the case for change and transition. The upfront analysis allows managers to define and communicate the message before rumors start, potentially damaging morale or prompting employees to jump ship prematurely. For example: “All employees from this closing location will be offered a position at stores A, B or C.”
Operations, HR and communications teams can collaborate to determine how and when the message is delivered. Keeping a regular cadence of communication helps achieve consistent actions across distributed field management and HR organizations, allowing exceptions where needed for specific union requirements.
Besides measuring the EBITDA impact of closing a poorly performing store, consider additional metrics when the scope includes staffing considerations by shifting employees from store to store, such as:
In addition to this success story on footprint optimization, other EY-Parthenon clients are using untraditional strategies to help solve for labor shortages. While it’s too early to quantify the impact, anecdotal results are positive. Their methods include the following:
To relieve teams at understaffed and struggling stores, another retail client is sending in special teams to provide off-hours and/or weekend support. Trained personnel assist with backlogged and off-stage tasks, such as straightening racks, organizing and bringing new merchandise from the backroom. Avoiding an unending pile-up of work helps protect employee morale. This strategy also has the potential to improve sales, as better merchandising and inventory management are critical to the customer experience.
Instead of calculating each store’s labor requirements based on total store sales, retailers are taking a more nuanced approach by using category-level sales. For example, when our client conducted a category-level analysis, it identified certain categories, such as vitamins and beauty, that require in-depth customer interaction and hence increased staffing. Other categories, such as pet food, require no customer interaction. Using the analysis, our client allocated more labor hours to stores selling more vitamins or beauty products than pet food and other products that involve little or no customer interaction.
One of our retail clients is working with local high school sports team coaches to have work-eligible students provide evening/weekend support at their distribution center. This program allows teens to gain valuable experience and earn money while enabling the company to bring in committed workers for simple, easy-to-train tasks.
Michael Ronan, Sahil Vaziralli, Taher Lokhandwala of Ernst & Young LLP contributed to this article.
While it’s important for retailers to continue to double down on traditional methods for talent acquisition and retention, finding ways to innovate through data analysis, technology use and automation can contribute to unconventional retail staffing approaches. The result can also play a valuable role in addressing the retail labor shortage.
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