Why Retailers Struggle in a Ferocious Labor Market

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Why Retailers Struggle in a Ferocious Labor Market

By Joe Skorupa - 04/10/2019

A tight labor market multiplies workforce management issues, which is bad enough, but even worse is struggling with shockingly inadequate labor forecast accuracy. That’s one of the major discoveries in the recently published report “Managing the Ferocious Labor Market.”

Turnover is high, unemployment is low, wages are rising, and younger generation employees are as demanding as younger shoppers. This is a perfect storm for retailers struggling to solve workforce issues and looking for answers.

A sustained 4% unemployment rate is an indicator of a strong economy and means shoppers have disposable income to spend in stores. However, it also restricts a retailer’s ability to consolidate gains and sustain momentum by draining resources to battle rising turnover, upward pressure on salaries, and an inability to recruit new hires.

For those who do not succeed in taming the ferocious labor tiger there is a real threat of losing customers to better managed competitors.

Limited Ability to Execute

Every retailer with brick-and-mortar stores depends on store managers and associates to drive sales performance and deliver positive experiences with customers. Key takeaways from the study indicate how retailers are struggling to make this happen.

One of the major findings in the study is that 70% of retailers do not have high confidence in their stores consistently doing the right tasks to achieve their goals.

This means that only about a third (30%) of retailers believe that 90% of their store managers and associates consistently carry out their tasks to achieve store goals.

This begs the question: What percentage of a retail chain’s stores should be expected to consistently do the right tasks every day? Is three out of four good? Is four out of five the right number? Is nine out of 10 too much to expect? Apparently it is for the vast majority of retailers.

How do retailers balance execution of traditional store fundamentals with new omnichannel functions and services in a tight labor market? That is the conundrum retailers face today and the reason labor concerns have risen to the top the retail priority list.

Adding to the challenge is the continual increase in corporate-driven workload to stores, i.e. seasonal resets, merchandising, promotions, omnichannel and more. Over the last five years nearly a third (30%) of retailers say corporate-driven workload has increased greatly and another 47% say it has increased somewhat.

A Challenging Environment

Turnover can be a store performance killer. Even with careful management it can cause productivity to drop, increase costs for training and recruitment, and potentially displease consumers by delivering inadequate customer service.

So, in the months ahead expect to see the retailer community to shift its investments and resources to the area of training.

One of the biggest takeaways in the study is that retailers believe their company’s labor forecasting ability is only 68% accurate. This is a shockingly low figure for any kind of forecasting accuracy in the modern retail enterprise, but especially for one used to set the number of associates on hand (daily, weekly, monthly) to meet customer demand. Misalignment between customer demand and staffing results in either high labor costs or lost sales or both.

The chief recommendation coming out of this report is for retailers to take steps to improve labor and demand forecast accuracy. This can be done by allowing local managers to have more input into creating schedules, updating associate task analysis to include recent changes (i.e. omnichannel tasks), developing methods for real-time or near-real-time sales reporting to enable quicker response times, and shifting from a store-cluster approach to forecasting at the individual store level.

Misalignment between customer demand and store staffing will produce inconsistent store performance results at best and disastrous results at worst. Improving labor forecast accuracy will have a direct impact on every aspect of store performance and is especially critical in today’s tight labor market.

This is just a brief summary of a longer report. Click here to download the full report with a complete set of charts and analysis.

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