Retail Revolution Challenges HR

While stores close, growth in e-commerce creates new positions

By Steve Bates May 4, 2017
Retail Revolution Challenges HR

HR in the U.S. retail industry is facing big challenges, with stores closing and retailers shifting to e-commerce to meet the changing demands of customers.

Recent news reports about massive store closings, such as those announced by Macy's, RadioShack and J.C. Penney, have prompted some industry observers to declare that the country is in the midst of a "retail apocalypse."

While stores will continue to close and workers will be laid off, the retail industry is gaining far more jobs than it is losing. Online shopping and warehousing operations created 355,000 jobs from 2007 to 2016, according to Michael Mandel, Ph.D., chief economic strategist at the Progressive Policy Institute in Washington, D.C. By comparison, he found, the general retail sector lost 51,000 jobs during that time.

Technology is driving many of the changes. Customers can browse, compare and buy on their phones. Retailers can manage their supply chains and delivery processes more effectively. "We're at a tipping point," said Mark Oshima, a managing partner with consulting firm Aon in Newport Beach, Calif. "I don't think we're going to go back."

Many of the new retail jobs require better skills and pay more. People who operate sales registers are in less demand. People who can enhance the customer experience are needed in greater numbers. Those who can analyze data to anticipate product demand and move goods efficiently are becoming crucial.

"Retail is at the beginning of some of the same kinds of changes we saw manufacturing go through back in the 1980s," said John Challenger, CEO of Chicago-based outplacement firm Challenger, Gray & Christmas. "It's changing the nature of work in the industry."

Mitchell Langbert, an associate professor of business management at Brooklyn College in New York, agreed. "The tech people are just too creative for the traditional employee relationship to remain where it's been since the Industrial Revolution."

Home Depot saw the massive transformation of the retail industry coming. It has closed few stores and is even opening new ones. To meet the changes in consumer preferences, the chain created in-store positions such as delivery associate and order fulfillment associate. And it is adding outside-the-store jobs such as logistical analyst and warehouse associate as well as software development positions.

"The business is changing faster than ever," said Sherry Yaskin, vice president of HR for U.S. stores and operations at Home Depot. "HR is more important than ever." She noted that each newly hired Home Depot store associate is given a coach to help the employee become adjusted and to improve retention.

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Rethinking Staffing Strategies

Jay M. Wallace, a partner with law firm Bell Nunnally in Dallas, said many retailers view their employees as "a fungible commodity." The retail industry has had a relatively high percentage of part-time employees and "gig economy" workers who operate as independent contractors.

Some retailers want to use more independent contractors and fewer employees, in part because contractors typically don't receive company benefits such as health care coverage. However, Wallace noted that many such employers are on thin ice legally, because workers whose hours are dictated by managers might not meet the federal government's definition of an independent contractor.

Langbert said that retailers might want to rethink their human capital strategies. They will need longer-term employees who understand the market and are loyal to their employer. Repurposing some of the people who are in danger of being laid off because of store closings could help. "Chains are going to benefit from retraining the existing workforce," he said. "HR is following business strategy. As the strategy changes, HR has to evolve."

"HR directors have got to think about a different kind of hiring model," Mandel said.  "Companies will get a chance to invest more in their workers as they move to the learning economy."

Oshima said re-skilling employees for new jobs "is definitely being talked about." He noted that one of his retail clients "is looking at the entire employee life cycle" to ensure that the worker experience is positive and that employees are offered opportunities to add skills.

Wallace, however, sees little interest among retailers to try to supplement workers' skills and shift them to newly created positions. "Retailers are trying to be as nimble as possible when it comes to the workforce," he said. "Most would be inclined to hire someone fresh."

As competition for talent forces retailers to offer better pay and benefits, companies start thinking of new hires as longer-term employees and tend to put more time and energy into selecting and developing them, said Todd Manas, a managing director with professional services firm Willis Towers Watson in New York City.

However, HR will be particularly challenged to attract workers to companies that are closing stores, he said. "People who are not in retail see the closings and think, 'Gee, do I really want to work there?' It makes it much harder to recruit and retain."

Oshima said some of his retail clients are looking at different segments of the workforce and trying to determine what attracts each of them. "HR leaders are having to use a more sophisticated and scientific approach."

And HR will have to work harder to get the most out of those who come on board. "Retailers are upping their game around managing performance and paying for performance," Manas said.

Steve Bates is a freelance writer in the Washington, D.C., area.

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