Committing to overcome challenges identified in HR leaders survey
To address current retail challenges and opportunities, examining the current state of the retail industry through the lens of a human resources department can provide insights not found elsewhere. HR departments have a connection to every major function of a business. Grant Thornton surveyed HR leaders in the retail sector to determine what factors they saw as important to help successfully fulfill their greatest challenge, hiring and retaining talent. Respondents also had plenty to say about other industry concerns, including the economy and technology use. From those results, key findings were identified, providing insights into the industry, such as:
- Focusing on attracting top talent is the dominant concern for HR.
- Developing programs to better incentivize retention by utilizing the inherent advantages their industry provides is a significant lever that can and should be pulled.
- The adoption of AI across multiple functions, from performance reviews to monitoring the wellbeing of employees, continues to gain momentum in retail and should be viewed with an eye toward integration rather than as a stand-alone technology.
These challenges for retailers aren’t HR’s alone to solve. The responsibility to attract and retain talent, implement technology to better serve employees and customers, and improve workflows to make departments more efficient, falls on the entire organization.
Talent acquisition
Finding the next leader
HR leaders in all industries represented in our survey identified attracting top talent as one of several key challenges. In retail, HR leaders chose it as the clear top concern and it’s not hard to understand why.
“When a retailer really starts to focus on the professional development of their employees, showcasing potential advancement, it can change the narrative from ‘temporary work’ to ‘career choice.’ This can make a huge difference in attracting talent and keeping employees longer.”
Jennifer Morelli, Grant Thornton Principal, Growth Advisory Services, asserted that one way for retailers to attract and retain talent is to actively promote career progression within the company.
“When a retailer really starts to focus on the professional development of their employees, showcasing potential advancement, it can change the narrative from ‘temporary work’ to ‘career choice.’ This can make a huge difference in attracting talent and keeping employees longer,” Morelli said. Other industries may be perceived as having more flexible work arrangements, even though omnichannelling and online sales have recently created the ability to be more flexible within retail. “It’s a perception that needs to be changed,” Morelli added.
Neima Golnabi, Grant Thornton Managing Director, Growth Advisory Services, said retailers that invest in targeted recruitment campaigns can have more success at attracting talent. At the operations level, the growth of omnichannelling and online shopping should lead retailers to consider more flexible work arrangements. Such arrangements are increasingly expected as table stakes by the younger workers retailers are looking to attract.
Generating company loyalty
Getting workers to join is only the first step. Retaining good employees is just as critical, and retail HR leaders completely agreed or agreed with the statement that employee retention was a crucial business goal. As shown, respondents believed employees stay at their organization primarily for bonuses and DEI&B efforts, with benefits (which most industries ranked first) falling to third.
Bonuses and incentive compensation, as well as diversity, equity, inclusion and belonging policies rate more strongly than benefits as a reason workers stay at organizations. While profitability concerns may put barriers on being able to budget the pay increases that can incentivize workers, David Koppy, Grant Thornton Principal, Growth Advisory Services, said retailers have the advantage of providing additional perks such as discounted merchandise to employees.
The low ranking of base pay as a retention tool (15%) supports the point that the value of working for a retailer is found in other kinds of compensation. Koppy pointed out that the other high-ranking responses — development and training and advancement opportunities — could be better emphasized in retailers, particularly in non-store roles.
When deciding on policies to retain top talent, leaders should also tailor their approaches to incentivize both front-office employees and customer-facing workers. For any team member, Morelli said, it’s important that retailers clearly articulate long-term career opportunities. And while the nature of retail employment at the starting level is understood to have a high amount of turnover, high-performing employees need to be identified and incentivized to stay.
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Business environment
A sense of stability
“The market share taken by the largest online retailers has created an existential threat to retailers; shifts in consumer behavioral patterns towards digital commerce have resulted in changes in whom retailers are hiring.”
Retail HR leaders are considerably less worried about impending layoffs (only 27% vs. 42% for all industries overall) which should provide retailers another selling point to attract and retain young workers. Golnabi said the common high turnover rate in retail, particularly at the entry level, can be seen as a buttress against fears of layoffs. A high turnover rate, while it creates problems in consistent delivery and training expenses, presents management with opportunities to focus on high-performing individuals with less pressure to cut them in bad times.
Retailers right now are relatively leaner organizations than most other companies, post-pandemic, Koppy said, since being one of the first and most hard-hit sectors forced them to make personnel cuts ahead of other industries. Other recent industry pressures have contributed to its efficiencies.
“The market share taken by the largest online retailers has created an existential threat to retailers; shifts in consumer behavioral patterns towards digital commerce have resulted in changes in whom retailers are hiring,” Koppy said. As a result, organizations are prioritizing hiring in corporate roles rather than a return to pre-2020 store employee numbers.
Technology and AI integration
The changes spurred by the growth of online retail also accelerated the importance of the adoption of technology, and particularly AI. Almost nine out of 10 HR leaders (88%) in the overall survey highly rated their companies’ use of technology. That confidence was also present among retail leaders, albeit to a lesser extent (75%). This points to an opportunity for some retailers to improve technology to stay competitive.
Golnabi said retailers are too often dependent on outdated data systems, or systems that aren’t properly integrated. There are reasons for this that are particular to the industry — many retailers may have small budgets, leading to cost pressures to use technology only to address immediate needs in a patchwork way rather than in a system-wide manner.
“The high turnover rate in retail can make it difficult to justify long-term investments in technology, which can, over time, lead to a pattern of under-investment.”
“In addition, the high turnover rate in retail can make it difficult to justify long-term investments in technology, which can, over time, lead to a pattern of under-investment,” Golnabi said, since the immediate need is for relatively user-friendly technology that requires little training. But the consequences of these choices can lead to less efficient decision-making, which can affect all operations.
To counter this, retailers should first assess current capabilities to identify gaps in order to develop a roadmap to tech investments that align better with business goals, Golnabi said. From there, integration is the key because it streamlines processes and improves data accuracy. For HR itself, an integrated data processing system should address performance management, payroll, recruitment and other department functions. For the company as a whole, integrated technology systems can better predict hiring needs, provide insights into existing workforce needs and enhance strategic planning.
“It’s not often an easy fix,” said Koppy, since there are many legacy systems still in use and because customizing it for particular needs can be difficult. With the rise of online sales, getting some retailers to transition from operating traditional brick-and-mortar sites to more opportunities to provide omnichannel customer journeys can be an immense undertaking, particularly for older companies.
AI adoption
A key component of any technology adoption in retail today is the use of AI. When asked how AI is being adopted in retail currently, retailer HR leaders differed from other industries in ranking monitoring the wellbeing of employees over other uses such as performance reviews and chatbots. Golnabi said this is a growing trend reflecting a broader commitment to enhancing workplace health and productivity through AI.
Retailers can create a supportive environment for employees through AI predictions and even wearables address mental health proactively and promote a culture of care and engagement. This approach ultimately contributes to a more satisfied, productive, and loyal workforce and serves as another way to bolster talent retention.
Adoption of AI in the retail workplace shouldn’t be done without a strategy. AI strategies are in place among retailers, though the survey suggests it’s not to the extent of other industries.
“Planning for artificial intelligence adoption is still in its early stages across industries and companies,” Koppy said. “That is partially due to decision-makers thinking about AI as a standalone technology versus something that's fully integrated into how work is performed.” When AI use is directed to address specific ad hoc needs, its adoption can be disruptive as well as beneficial.
Nonetheless, its use shows promise in many different retail functions, Golnabi said, including:
- Customer service chatbots
- Personalized shopping experiences
- Optimizing staff schedules
- Inventory management
- Product traceability
- Demand forecasting
- Targeted marketing
Eye on the future
Retail is dominated more than most other business sectors by a reliance on young generations for new talent. Consequently, the most successful retailers will be those that closely monitor factors such as culture, communication and benefits aimed specifically at attracting talent from this demographic. Many factors contribute to the success of retail businesses, but bringing in and keeping the right people is foremost, and company goals should be structured accordingly.
As the graphic above shows, HR leaders in retail see that the key to long-term success is wisely using the sector’s limited margins to be the preferred choice for the retail industry’s finite worker pool. “Attracting and keeping younger employees is vital. Retailers who are successful in enticing young talent to their company gain workers who understand today’s market dynamics now and will form the core of tomorrow’s leadership,” Morelli said.
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This Grant Thornton Advisors LLC content provides information and comments on current issues and developments. It is not a comprehensive analysis of the subject matter covered. It is not, and should not be construed as, accounting, legal, tax, or professional advice provided by Grant Thornton Advisors LLC. All relevant facts and circumstances, including the pertinent authoritative literature, need to be considered to arrive at conclusions that comply with matters addressed in this content.
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