The “skilling up” of the retail workforce has the potential to enable retail workers to improve their productivity and career prospects, while enabling retail companies to build their future workforces. Purposeful investors can identify these companies and take a long-term investor view to encourage these companies to train and deploy this workforce.
The widely reported decline of physical retail stores is alarming for a variety of reasons, but retail stores are likely to live on in one form or another for the foreseeable future (as evidenced by Amazon’s recent moves into the “bricks and mortar” space). The question for retail workers is “Which retailer should I work for?”
Our recent report Retail Automation: Stranded Workers? Opportunities and risks for labor and automation provides some insight into this question for people who are looking to join or currently work in the retail sector. The report highlighted structural changes under way in retail that have the potential to impact the size and wages of the retail labor force. More than six million of the 16 million retail workers in the US, especially women and those located in smaller regional hubs and rural areas are at risk of losing their jobs to automation just in light of technology that is currently available.
Our research revealed two key automation-related trends likely to affect labor.
First is the “hollowing out” of middle-skilled workers who perform routine tasks, like cashiers and back office associates. These workers will either retrain for higher-skilled jobs or, without training, be pushed down into basic “innate ability” jobs (such as store greeters), with minimal career growth opportunities.
Second is the potential movement of retail stores to more clearly bifurcated strategies:
- Convenience – focus on removing the “friction” of the purchase process within the retail store to increase sales volume and decrease labor costs through technology.
- Experience – focus on enhancing consumers’ interaction with the store and its employees to increase pricing power.
Companies that adopt an experience strategy are likely to invest in their workers and use technology to enhance the effectiveness of their workforce. In contrast, we see convenience strategies as reducing the absolute number of workers to save costs. Our report offers a framework for assessing a company’s movement towards a convenience or experience strategy—or its lack of clear direction.
What’s a retail worker to do?
Based on these two trends, retail workers looking to navigate the structural changes under way should favor companies that provide tuition reimbursement and/or technical and programming training. Workers who acquire the skills to advance beyond their current roles will be better positioned to benefit, or at least avoid harm, from these secular changes.
Examples of companies that provide such programs are shown in Figure 1.
Figure 1: Publicly disclosed tuition reimbursement and incentivized training programsSource: Company reports, Cornerstone Capital Group
Amazon, Lowe’s, Gap, and Wal-Mart offer public disclosure around tuition reimbursement that suggests they are positioning their labor force for retail jobs of the future. Best Buy intends to increase its investment in employee development, while automotive retailers Advance Auto Parts and O’Reilly Automotive signal support of their labor force advancing within the automotive field.
Most retail companies are also actively hiring a range of programming, user experience, and merchandising workers. Retailers are competing with Silicon Valley for workers that are in high demand and have seen their wages grow significantly over the last decade, as shown in Figure 2. (Note: our original report did not explore this trend.)
Figure 2: Software developer hourly wage growth vs. total private hourly wage growth
Source: BLS, Cornerstone Capital Group
Retailers already employ a large workforce that, with training, could provide these higher-skilled services. In addition, these workers have corporate knowledge that could allow them to be more useful to the organization than a Silicon Valley software developer.
The “skilling up” of the retail workforce has the potential to enable retail workers to improve their productivity and career prospects, while enabling retail companies to build their future workforces. We believe purposeful investors can identify these companies and take a long-term investor view to encourage these companies to train and deploy this workforce.
Sebastian Vanderzeil is a Director and Global Thematics Analyst at Cornerstone Capital Group.