How Are Current Headwinds in the Retail Labor Market Creating Challenges for Workforce Management?
Current headwinds in the retail labor market present formidable challenges and hurdles for retailers in effectively managing their workforce. These challenges arise from dynamic shifts in economic landscapes, evolving consumer behaviors, and rapid technological advancements. In this seven-part series, we will examine these key challenges, the impact on retail stemming from changing consumer dynamics, and proactive strategies companies can employ to navigate these strategic challenges.
In part one of this seven-part series we outline the nine critical challenges facing retailers today.
Critical Retail Challenges
- Labor Shortages and Recruitment
HR departments in the Retail industry are encountering challenges in both attracting and retaining skilled employees, especially in a fiercely competitive job market. The surge in demand for labor, propelled by the expansion of e-commerce and omnichannel services, has ushered in a "sellers' market." Consequently, prospective hires frequently have multiple appealing options to consider. Moreover, the seasonal variations in labor demand further compound the predicament for companies, compelling them to seek additional temporary or part-time hires.
- Rising Labor Costs
Minimum wage increases and intense labor market competition are driving up salaries in retail. To attract and retain talent, companies must offer added rewards and incentives. The necessary investment in employee training also increases labor costs. HR teams must balance these factors to sustain a skilled workforce within budgetary constraints.
- Shift in Skill Requirements
The continued growth of omnichannel retailing demands a shift in employee skill sets, notably toward digital literacy and adeptness in customer service for online engagements. Additionally, there is a growing demand for versatile staff capable of seamlessly transitioning between in-store responsibilities and fulfilling online orders.
- New and Emerging Technology
Emergent technologies, significantly AI, hold the potential to diminish the need for certain traditional roles while simultaneously fostering a demand for new technical positions. Additionally, there exists a challenge in effectively integrating these recent technologies with established workforce management systems.
- Evolving Consumer Expectations
Shopper expectations in an omnichannel environment are evolving rapidly, demanding seamless integration across online and physical platforms. Customers anticipate personalized experiences, convenient access to products, swift delivery options, and consistent service quality, prompting retailers to adapt swiftly to meet these dynamic preferences for enhanced satisfaction and loyalty. The rising popularity of services like Buy Online, Pick-Up In-Store (BOPIS), Same-Day Home Delivery, and Ship-From-Store (SFS) requires retailers to adjust workforce strategies to efficiently fulfill these orders.
- Regulatory and Compliance Pressures
Retailers face regulatory and compliance pressures with labor laws encompassing working hours, hourly store managers, overtime, and employee rights. Managing these complexities across diverse regions and countries presents challenges in ensuring adherence to regulations and maintaining compliance within varying legal frameworks.
- Employee Engagement and Retention
Maintaining high employee morale and job satisfaction in a high-pressure industry with non-standard working hours poses a challenge. Addressing burnout and combating high turnover rates, which incur significant costs and disrupt operations, are crucial for sustaining a productive workforce and fostering a positive work environment.
- Impact of Globalization
Global competition in retail impacts domestic labor markets as local businesses contend with the scale and resources of international retailers. Managing a global supply chain involves navigating complexities such as conflicts disrupting shipping channels and influencing local labor demands. Adapting to these challenges requires strategic planning and agility in workforce management.
- Economic Uncertainty
Economic downturns often result in reduced consumer spending, necessitating retailers to adjust their labor force accordingly to align with demand. Fluctuations in currency and trade policies can impact sourcing and labor costs, compelling retailers to adapt their strategies to mitigate financial risks and maintain profitability amidst market uncertainties.
These retail challenges present both risk and opportunity for retailers, demanding agile and innovative leadership in workforce management. It is crucial for leaders to explore strategies to navigate these complexities effectively.
Ankura Performance Improvement Fundamentals
We have a proven record of helping companies execute strategic plans to achieve sustainable performance improvement and targeted operating results aimed at maximizing earnings before interest, taxes, depreciation, and amortization (EBITDA), cash flow, and shareholder value.
We work side-by-side with management and other stakeholders to guide companies through periods of uncertainty and subsequently accelerate growth and value creation.
Winning companies map their workforce management strategy and initiatives against their customers’ journey to develop a customer-focused approach to align and manage labor. Ankura has the unique skills to identify and quantify benefits, as well as implement our proprietary labor planning, forecasting, and scheduling tools while facilitating implementation across all facets of workforce and field management.
Our Approach To Helping Clients Respond to Critical Workforce Demands Includes:
- Human Capital Design – Create a human capital assets plan in accordance with the overall strategy
- Labor Utilization - Align labor utilization to meet demand, and focus on customers to improve conversion
- Performance Management - Apply a data-driven and talent-centric performance management approach
Our Workforce Optimization Experts:
Mike Casey
Managing Director
mike.casey@ankura.com
Eugene Kim
Senior Director
eugene.kim@ankura.com
Matt Sgrignari
Director
matt.sgrignari@ankura.com
© Copyright 2024. The views expressed herein are those of the author(s) and not necessarily the views of Ankura Consulting Group, LLC., its management, its subsidiaries, its affiliates, or its other professionals. Ankura is not a law firm and cannot provide legal advice.
