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The retail labor shortage, automation and the state of work

The health of the retail industry is strong, but the retail workforce adds a new set of challenges as the retail labor shortage drags on.

5 min read


A retail store displays an "open" sign -- The retail labor shortage, automation and the state of work

Artem Beliaikin/Unsplash

It’s safe to say that the health of the retail industry has largely bounced back from the dark days at the heart of the pandemic. Consumers are spending, they are continuing to buy things online while also heading back into stores and retailers are seeing growth. But the workforce is presenting a new set of challenges, especially amid the retail labor shortage that is top-of-mind for everyone in the industry.

These challenges — and the solutions retailers are working out — have taken many forms, which differ for the retail workforce from stores to warehouses to corporate headquarters.

The state of the store workforce

Between the pandemic and the retail labor shortage, many retailers have responded to challenges related to hiring and retention at the store level by raising pay for associates. But the story goes well beyond hourly pay rates.

While some retailers had to contend with shortened store hours well into 2022 because they were shorthanded, the biggest players used their resources to beef up their benefits. Amazon, Target and Walmart all added tuition assistance as a perk for store employees. Home Depot implemented an expedited hiring process to help fill its labor needs before the busy spring season.

Walmart has also expanded its strategy to the truck drivers who move its products to and from stores and warehouses. Earlier this month, the retail giant announced it would raise salaries for long-haul truck driving employees, giving them the potential to earn as much as $110,000 during their first year of work. Walmart also launched a 12-week training program for new truck drivers.

Overall, there is a definite consensus among retail leaders that workforce retention efforts should go beyond wages in the face of the retail labor shortage. Benefits packages and communicating with employees about environmental, social and governance efforts, community engagement and company history are also key to retaining employees, Meijer President and CEO Rick Keyes said at FMI’s Midwinter Executive Conference.

“Pay is entry-level, table stakes,” Keyes said. “Every year we want to layer in additional benefits to make Meijer a better place to work this year than it was last year.”

Automation comes into play

Automation has proven to be a boon for retailers looking to tackle the challenges of the labor shortage and the pandemic-led shift to omnichannel head-on.

Walmart saw digital orders increase by 170% in the past year, and the retailer plans to add more in-store market fulfillment centers to grow pickup and delivery capacity by 35%. The fulfillment centers use automated bots to speed up order assembly, but also rely on personal shoppers to hand pick fresh items such as produce.

Walmart is also putting millions of dollars into upgrading 25 of its regional distribution centers with high-tech automation, including artificial intelligence-powered software and robotics. The upgrades will speed up product intake, double the original space capacity and improve worker safety.

Walmart is only one of several retailers upping their tech spend on automating more tasks as the labor shortage continues. DSW rolled out a self-checkout pilot at its stores. And Walgreens Boots Alliance has extended automation to the pharmacist role.

At a Walgreens facility in the Dallas market, prescriptions are filled by robots that have the capacity to fill as many orders in one hour as a traditional pharmacy can do in a day. The drugstore retailer expects to open 22 of the automated facilities in the next three years, where eventually 50% of Walgreens prescriptions will be filled by robots. The move will free up pharmacists to handle time-sensitive orders, controlled substances and other tasks.

Assessing retail’s corporate workforce

Corporate retail employees have also seen their share of change over the last two years — and many retailers, like companies in other industries, are finally thinking about office work differently.

Target will permanently adopt a hybrid model for its 8,500 employees who work out of the retailer’s downtown Minneapolis offices. The model will give individual workers and their teams the flexibility to determine when and how often they need to be in the office. Target decided to make the change in response to employee feedback, and the retailer has even redesigned some of its office spaces to include flex areas with temporary desks and meeting spaces.

Amazon has expanded its focus to include its tech workforce. The e-commerce giant is raising the maximum base salary for corporate and tech employees from $160,000 to $350,000 per year in response to the highly competitive labor market.

Department store retailer Neiman Marcus credits a flexible work policy in its ability to attract and retain workers at its corporate headquarters throughout the pandemic and beyond. The company will extend the policy with the creation of a new Dallas office hub, where employees will continue to be allowed to work remotely with the option of coming to the office to collaborate with coworkers when necessary.

And the shifts continue: Hy-Vee announced it will transfer as many as 500 of its corporate employees to positions in stores as part of a cost-cutting strategy. The move comes as Hy-Vee — like virtually every retailer today — faces the labor shortage in addition to other challenges like supply chain disruptions, rising inflation and higher costs.

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