Retailer Competition Going Crazy
Demographic, economic and cultural shifts are permanently altering the profile of the retail work force. Among the primary shifts affecting retailers are the aging of the population and the continued number of women joining the labor pool.
Retailers have traditionally relied on two segments of the population for an ongoing supply of their store-level work force–young adults and female homemakers.
The influence of the baby-boomer generation on all aspects of our economy and our culture has been widely documented. The boomers, the single largest and most influential segment of the population, are entering midlife.
Currently, adults aged 45+ account for 34% of the U.S. population, a figure that is expected to swell to over 40% by the year 2015 and adults 55+ are projected to account for close to one-third of all Americans.
As a result, the proportion of the population under 30, those young adults that retailers have relied on, particularly for seasonal and part-time positions, are in short supply.
In addition, the women’s labor force is growing at a faster pace than men’s (17% vs. 9%), a trend that is expected to continue. By the year 2000 it is estimated that greater than 30% of all households will be headed by single parents and 50% of all households will be dual-income homes.
This does not necessarily bode well for retailers since many women entering the labor force are opting for higher-skilled, higher-paying occupations that frequently offer working conditions and/or schedules considered to be more attractive than those offered at store level.
Recruiting Tactics for the New Age
The changing environment in which retailers must now recruit store employees calls for changing strategies in recruiting and retaining quality store associates. The days of filling the store staff with walk-in applicants or even referrals from existing employees are largely in the past.
In order to attract high-quality candidates in the increasingly competitive environment, progressive retailers are focusing on identifying individuals who possess characteristics that are desirable to the retailer and for whom the retailer is the employer of choice.
The desirable characteristics of the store associate vary from one retailer to another and, therefore, so do the recruiting tactics.
In many cases what makes the retailer the employer of choice for the prospective employee is the nature of the merchandise. Specialty retailers are at an advantage since the merchandise offer is, by definition, specialized. By seeking out individuals who are enthusiasts (and consumers) of the merchandise sold in the store, the retailer greatly increases the chances that the employee will be knowledgeable and take pride in his or her work and the overall operation of the store.
At Borders Books and Music, almost all employees are avid readers and/or frequently listen to music. Moreover, the associate in any given area of the store–say Science Fiction or Children’s or American History–is probably an enthusiast of that subject and he or she is likely to have read many of the titles on hand. Other employers known for seeking out enthusiasts include The Home Depot and Best Buy.
At Recreational Equipment Inc. (REI), the largest consumer cooperative with 1.5 million members and 49 stores in 21 states, the motto is to live what you sell. Sales associates at REI are outdoor enthusiasts and product experts who consider it their mission to not only educate customers, but to also serve as a resource for buying staff who often consult associates on their use of certain products. The emphasis on outdoor pursuits is evident in the interviewing process where recruits are often questioned about specifics such as the type of tent or fishing pole they use.
The implications for superior customer service are obvious. Other benefits of employing the enthusiast are that job satisfaction goes up and turnover decreases since employees are able to integrate their personal interests and passions into their work lives.
Another tactic used by some retailers is providing opportunities to individuals who may lack the requisite entry-level qualifications. In the past, there have been many programs, typically sponsored by state and local governments, to provide incentives to companies that employ disadvantaged classes of individuals.
The difference this time is the motivation behind retailers’ involvement in such programs. Past participation was primarily driven by the short-term financial advantages afforded participants–typically tax credits or subsidized wages for qualified associates and the commensurate reduction in store operating costs.
Today, however, as previously emphasized, retailers face a critical shortage of qualified applicants. By participating in programs such as the Welfare to Work Partnership or other similar initiatives, retailers have an opportunity to attract an employee, who, given appropriate training, can potentially remain a competent, loyal store associate for many years.
Wal-Mart and Sam’s Clubs are among the retailers involved in such programs. Wal-Mart has demonstrated a long-standing commitment to participate in welfare-to-work programs as a key element of providing staffing for its stores and clubs. Wal-Mart works with state welfare and employment agencies to find welfare recipients. Once hired, associates at Wal-Mart are encouraged to obtain a GED and are reimbursed for expenses incurred.
TJX Cos., whose subsidiaries include T.J. Maxx and Marshalls off-price apparel stores, is also a participant in the Welfare to Work program, having hired approximately 3,000 people within the past year and a half. According to Sherry Lang, TJX’s investor relations director, given the success of the program, TJX has pledged to increase that number to 5,000 people by the year 2000.
Chain drug store industry leader Walgreens has hired people on welfare as part of its normal hiring routine for a number of years. As an active participant in “Earnfare,” a subsidized volunteer program administered by the Illinois Department of Public Aid, Walgreens provides food stamp recipients with work skills necessary to find unsubsidized jobs. Volunteers are required to work 80 hours a month for six months to maintain eligibility and, although participants are not paid an hourly wage, they can earn up to $231 per month. While this is not enough to allow participants to live above the poverty level, they do gain job experience. Additionally, of the 100 or so annual participants, Walgreens recruits some as permanent hires. According to Jim Schultz, Walgreens’ director of performance development, these hires typically have a higher-than-average retention rate.
An Unconventional Approach
In addition to contending with a tight labor market, many retailers also fight an ongoing battle with chronic absenteeism. This can be particularly problematic for smaller stores which may have minimum coverage levels, where even one missing person means the store won’t function properly that day.
An innovative solution is being tested through an alliance formed by Simon DeBartolo Group and the Olsten Corp. As part of the test, Olsten is establishing in-the-mall employment service centers in Simon DeBartolo properties. These centers will offer temporary resources as well as recruitment and training services.
Olsten hopes to gain access to a relatively untapped market for its services while assisting retailers with their store labor needs.
On the flip side, the alliance provides retailers with access to a short-term temporary labor pool to address short-term needs as well as screening, placement and training services geared specifically to the retail market. While this approach will not fit all needs for all retailers, it does represent a creative solution to meeting store labor challenges.
Innovative techniques for identifying and recruiting desirable candidates for store positions are necessary steps to building high-quality store teams. Of even greater importance however, is the need to reshape the working environment at store level to provide a rewarding work experience.
When store employees feel that their individual role is significant, when they understand how that role affects store results and when individual payoff for superior store performance is understood, satisfaction goes up and turnover goes down.
The traditional approaches to training, motivating and managing store teams are changing just as the tactics used for recruiting are. The overriding theme of retailers who are succeeding in improving retention is to provide a focus on the individual associate.
Almost all companies talk the talk of the importance of store associates, but annual turnover rates of 75% and higher are evidence that not many companies are walking that talk.
Those that have been able to reduce turnover have done so through performance-based compensation (for all store associates, not just a few managers), nontraditional training and, in some cases, radical departures from conventional management and decision-making approaches typically used to run stores.
Reshaping the Store Environment
Known by many for transforming coffee into a fashion beverage and introducing a whole new vernacular into the language, Starbucks Corp. is also recognized for its commitment to its employees. Starbucks has created a culture dedicated to challenging employees (referred to as partners) to be their best.
To support employees in their efforts, Starbucks offers a comprehensive benefits package including insurance and partner stock options to all employees including part-timers who need work just over 20 hours per week to be eligible.
All new Baristas or hourly partners receive 25 hours of classroom training including customer-service skills and coffee knowledge, taught by partners that have been specially trained.
Management trainees participate in eight to 12 weeks of classes and receive coaching on leadership skills, advanced customer service and diversity awareness as well as succession planning and career development.
Starbucks’ investment in its partners appears to be paying off as demonstrated by the company’s continuing success as well as its inclusion in Fortune magazine’s list of the 100 Best Companies to Work For in America.
Another example of a truly differentiated store-operating environment is Whole Foods, a high-end chain of supermarkets emphasizing organic and fresh foods.
At Whole Foods, the store organization and decision making processes are anything but conventional. The chain’s mission statement begins with a Declaration of Interdependence, reflecting its culture of decentralized teamwork.
Each store operates as an autonomous profit center organized around self-managed teams. Each management level operates as a team–within the store, across regions and across the company.
In this sense, teamwork encourages cooperation as well as competition. The team concept also applies to hiring decisions. Each store team, and only the team, is empowered to approve full-time hires. Candidates engage in a 30-day trial period, after which time they must receive two-thirds of the team’s approval to become a full-time hire.
Whole Foods considers itself a social system rather than a hierarchy in which rules are passed down. It is believed that peer pressure fosters loyalty in ways that a typical hierarchical organization cannot. To this end, all financial and performance measures are available for team members’ review, including salary levels.
Additionally, bonuses are directly tied to team performance and all store team members are bonus-eligible. Evidence of Whole Foods success is demonstrated by its average shareholder return of 23% over the past five years.
An Emphasis on Training
With alternative career-path options available to prospective candidates for store positions, retailers can gain an edge if they offer more than rudimentary training to store associates. That has been one key step taken at Sears, Roebuck and Co.
Sears believes that “unless you have a trained, literate, motivated work force and give them decision-making authority, you don’t get satisfied customers no matter how good the merchandise. The right work force creates customer satisfaction, and that produces superior financial performance.”
As part of its efforts to achieve what is by now a well documented turnaround, Sears invested significant time and resources creating and refining an empirical model that supports the above. Known as the Employee-Customer Profit Chain, Sears’ model plays an integral role in the company’s vision to be a compelling place to work, shop and invest.
In simple terms, the model quantifies the causal relationships (as compared to correlation) between employee attitude, behavior and retention, as well as the degree to which those factors drive customer satisfaction and how that, in turn, drives financial performance.
The model serves as a predictor of behavior and quantifies how change in one component (i.e. increased sales associate product knowledge) impacts other components (i.e. customer retention, market share, revenues, etc.).
Sears has taken additional steps to encourage positive employee attitudes and ensure a customer orientation. These include a strong emphasis on employee training.
Specifically, Sears has initiated an ongoing process using learning maps and monthly town hall meetings to expand employees’ business and economic knowledge and foster customer-focused behavior. All levels of the organization participate in this process from management to in-store associates.
Additionally, Sears has developed programs to cultivate and increase leadership among managers. This includes 3600 performance appraisals based on input from supervisors as well as peer and subordinate reviews, and the establishment of Sears University to offer courses to enhance leadership and shed light on issues essential to smooth operation of the Employee-Customer-Profit Chain.
Finally, Sears has implemented a new reward and compensation program that reinforces desired behaviors and includes a mix of both financial and nonfinancial performance measures.