By Solange Strom and Frederic Dimanche
Retailers Must Prepare to Compete for Talent
Competition for talent in the retail industry has always been fierce in Canada. Sadly, the retail industry has one of the highest turnover rates in North America, and it is a challenge to find and retain talent in this sector.
The current pandemic has undisputedly exacerbated the problem. Disproportionately affecting the retail industry with massive furloughs and layoffs, it has left thousands of workers without a job. One therefore assumes that when establishments reopen in full, there will be a large pool of eager candidates to choose from.
But it’s quite the opposite that is happening. Many employees have left the retail sector all together, either moving away from major urban centres or avoiding frontline positions due to anxieties over safety, health, and wellbeing. In addition to those concerns, the poor renumeration, lack of recognition and absence of career path are ongoing compounding effects.
The consequence will be a dearth of talent and loss of expertise in the retail industry that will affect every business and overwhelmingly the specialty and luxury retailers who rely largely on physical spaces for growth and brand awareness.
Managing the situation has never been more urgent. Experts have suggested various solutions from increasing remuneration to allow employees to have a viable salary to overhauling the HR departments to make them more “marketing oriented”.
These propositions are all commendable and certainly necessary, but unfortunately don’t address the root of the problem: The pervasive belief amongst retailers including specialty and luxury ones that their front store staff are not highly valuable members of the company’s overall human capital.
A paradigm shift is necessary if things are to improve. Retail management and leadership must recognize the inherent importance of customer-facing employees and put adequate measures in place to ensure that they not only return to retail but also thrive, grow, and stay. There are 3 sine qua non factors to attract and keep people: Better compensation, training, and career planning.
The retail industry has long suffered a reputation for low compensation, and improvement has been slow despite numerous studies showing the benefits of paying staff well. In 2015, when some prominent US retailers decided to increase their minimum wages in an effort to curb turnover, their move was immediately questioned. Weren’t they risking “the wrath of investors by forking over more money to their least-valuable employees?”
While investor concern is admirable, what is shocking is that front-store employees are considered expendable. This stance is unfortunately alive and well in the retail world, including at some luxury and specialty retailers who fail to appreciate the inherent value provided by store teams. However, with the physical store under threat and the customer now king, it is vital to acknowledge the importance of store employees.
Gone are the days when retailers could just hire “bodies” for the stores. Today, they need the best talent available and to attract them, paying well is the first step. When one knows that poor compensation is a recognized source of employee dissatisfaction and that disgruntled employees tend to deliver subpar performances, eventually leaving the business altogether, it seems unreasonable to ignore the issue.
To overcome this, some experts have recommended an increase of the minimum wage. While doing so would elevate the industry as a whole and benefit the average individual, it won’t solve the lack of talent problem as it levels the playing field without making a significant difference in terms of vying for and rewarding the best candidates.
In view of the rapidly shrinking talent pool, the truth is that remunerating adequately is too little, too late. Multiple studies have demonstrated that one of the most effective ways to vie for the best talent is through better compensation packages. Therefore, specialty and luxury retailers must pay substantially higher wages and provide other benefits to attract and retain the finest talent. Doing so will entice superior candidates who are more engaged and deliver greater returns on investment. Employers can hold them to higher standards and expect more of them. “Paying good wages is not altruism,” says Jim Sinegal, CEO of Costco, “it’s simply good business.” Only retailers convinced of that fact will have a chance to survive and thrive.
Training Cannot be an Afterthought
Together with higher wages, retailers must offer employee training and development. Doing so leads to better job performance and greater confidence. Employees are more skilled and knowledgeable, and deliver enhanced customer service which in turn triggers a direct improvement to the company’s bottom line.
Surprisingly, few retailers invest in comprehensive coaching. They either lack the proper training tools, believe on-the-job training delivers adequate results or hire someone else if the current candidate doesn’t work out. Even when training is available, it rarely addresses the blatant skills gaps. One of the most critical is “sales” aptitude.
It is common knowledge that many “sales associates” cannot actually “sell” and are nothing more than glorified cashiers. Retail expert Pamela Danziger sounded the alarm in 2018 stating that having warm bodies on the sales floor was simply not enough to meet the customers’ evolving expectations and that “stores should staff to maximize sales and profits, not to minimize costs.”
Granted, retailers might have overlooked the need for true salespeople in the past when retail was largely product-driven, and brands could spur demand through elaborate marketing campaigns. But the emotional intelligence needed to sell is a skill that can no longer be ignored. The days of the uninspiring retail associates are over. Today’s retail personnel must be experts in their domain, highly knowledgeable about their industry and their products, capable of developing noteworthy relationships with customers that last over time. They connect and engage with shoppers to ultimately inspire them to purchase. Teaching employees to do so is not that hard but it requires a willingness from the employee to learn and a deep commitment from leadership.
Yet, retailers still argue that the cost of training outweighs its benefits. They are missing the point when they forgo this critical step in employee management and ignore the high cost of turnover to focus on short-term benefits. In North America, turnover represents 16% of the average employee salary. It impacts every aspect of the business from productivity and customer engagement to employee morale and overall perceived organizational culture. Replacing departing employees is significantly more expensive than retaining them.
Retailers may also blind themselves to future possibilities. Providing superior training is an expense, but one that is quickly amortized by revenue growth, increased customer engagement and turnover decrease. In an industry with growing e-commerce capabilities, the client who visits a physical store expects nothing less than superior expertise and competence and that can only be delivered through comprehensive training.
Career Path Planning is Key
One future benefit of having well-trained and competent team members is that it builds a pool of strong candidates who are groomed for growth opportunities within the organization. Training not only allows retailers to give teams more satisfaction and self-confidence, challenging work, and more autonomy, it also sets them up for advancement. What retailer wouldn’t want to retain its best and brightest to move them up the company’s ladder?
Unfortunately, career planning is rarely addressed in retail and when it is, the timing is often wrong. Talking about future career options must be done upon hiring if retailers wish to remain competitive in the marketplace. This ensures they are perceived as an employer of choice since providing a clear career path is a critical part of the equation. According to consulting firm Mercer, 44% of employees say that they would stay longer with their current employer if they knew their career path. Without one, a third of employees see their employment as a job, not a career.
Discussing the issue during the interview also allows employers to get a sense of the candidate’s drive and ambition, further enabling them to better tailor their hiring selection. Once the candidate is hired, the career journey is then included in his or her development plan, so long as key milestones are achieved, allowing for better human capital forecasting. When one knows that it takes companies an average of 52 days to fill an open position and find a suitable candidate (the equivalent of 2 months of resources), it makes sense for companies to invest in the talent they already have and build strong succession plans.
Retail Needs Committed Leaders
Luxury and specialty retailers are faced with a tough challenge addressing the dearth of talent in Canada. It is one that takes long-term commitment, conviction and a clearly executed strategy. When leaders start really crunching the numbers, they are bound to realize that not implementing changes will not only be detrimental to their company in the short term, but also in the long run. They would be foolish not to commit to focus on hiring, training, and retaining the best talent.
A non-profit organization founded by Zeynep Ton, a professor at the MIT Sloan School of Management, calls such an employee-centric strategy, the Good Jobs Strategy. Triggered by the competitive landscape, some companies have implemented such a strategy recognizing that engaged employees are more productive, provide better service and are less likely to jump ship – an especially significant concern in retail where turnover was, before COVID, at an all-time high.
The Good Jobs strategy is not something that is done overnight, but once retailers are convinced that labour cannot be viewed as a cost to be minimised but as a driver of sales and profits, it is considerably easier to carry out. They are able to create a virtuous circle where investing in employees drives excellence in operational execution, in turn boosting customer satisfaction, sales and profits, and allowing for a larger labour budget.
If Costco is able to pay 22$ an hour despite being a low-cost retailer and still be profitable, it is absolutely possible for luxury and specialty retailers to offer significantly higher wages. After all, those retailers typically benefit from making luxury margins. Leaders must commit to use some of their profits to invest on their most important assets: The associates who face their customers and generate revenues every day.
Solange Strom, visionary and entrepreneurial retail executive with a track record of driving growth through employee-centric strategies. 25 years helming global brands such as Boiron, L’Occitane en Provence and Repetto Paris. Founder of the Radical Retail Method, a training program aimed at supporting retail organizations in their quest for excellence. To contact Solange visit www.solangestrom.com.
Frederic Dimanche is a Professor and Director at the Ted Rogers School of Hospitality and Tourism Management at Ryerson University. He has thirty years of professional and academic experience in service marketing and consumer behaviour, particularly in hospitality and tourism. His academic experience includes in the USA, France, and Canada.