Alpha8472 wrote: ↑May 25th, 2021, 3:25 am
Many companies are having problems keeping employees. If an employee quits, the company needs to spend money to train a new employee. This is time and money. With unemployment pay so easy to get today, many people are quitting and staying on unemployment.
Companies need to realize that a small investment in more staffing will ease the stress on overworked employees. Fewer employees will quit and you will save money on training new employees.
There will be an increase in sales as lines at checkout will be shorter. Customers will be more satisfied and they are more likely to return and buy more. A staffing increase will help sales, and not hurt profits.
Walmart of all companies is doing reasonably well. They can afford to invest in more staffing and make a difference in increasing sales.
There are three factors that are causing these issues in major retailers, and something has to give or I fear Amazon is going to be able to completely take over the world.
First, Wall Street expects that retailers grow sales and leverage payroll doing it. Payroll is a percentage of sales - that percentage cannot go up, only stay flat or decrease. And all you have to do is review the quarterly earnings reports for publicly traded retailers and you'll see that they are not spending more than they were a year ago, two years ago, three years ago. If your payroll as a percentage of sales increases then you will be beaten to a pulp by the Wall Street analysts and investors, the stock will plummet, and in many cases these retailers have been buying back their stock (investing in themselves) which means that they will then take losses on their own stock on the next quarterly earnings (usually the only way out is to cut payroll to offset the projected earnings loss). The bad earnings lead to another stock drop, and you quickly see the retailer go into a death spiral on the road to Chapter 11.
Second, the cost of labor is increasing as we all know. But despite the glossy press releases from these retailers that announce their minimums are increasing - what they don't say is that they will not spend one additional cent on payroll even with those wage increases. So if the average pay rate in the retailer went from $13/hour to a new minimum of $15/hour, about a 15% increase, they will adjust for the new higher rate with a 15% reduction in labor hours. The store must now Do More With Less. In cases where they cannot afford to reduce the hours any further (lower volume stores) then they will adjust the Management Structure of the store, eliminating higher paid Assistant Managers and replacing them with lower paid supervisors or leads. (Walmart made an announcement a few years ago that they were creating tens of thousands of new leadership positions - the reality was they eliminated thousands of salaried high paying Assistant Manager jobs and replaced them by promoting regular associates to supervisors making a few cents more per hour than they did before - ultimately cutting hundreds of millions in payroll). Again just because the minimum wage increases either by government edict or company decision that does not mean that the payroll is actually going to increase at the store level, or that collectively the employees are going to make any more money. Stores are going to have less service, lower standards, and more shrink (which most retailers stupidly try to offset by, guess what, lowering payroll!) You can see how this kind of death spiral led to Walmart closing some of their highest volume stores in the company in California because they couldn't cut any more expenses and the shrink ate then alive even in good areas. (That Irvine Store that closed that everyone figured was going to be replaced by another retailer who would pay more rent? It's vacant and nobody is going in - Walmart is paying dead rent and hasn't even liquidated the fixtures - the payroll rate required in the area was too high and the shrink was too high - it lost more money open than closed).
Now the real killer is e-commerce. With everything I stated above - Wall Street expects no additional payroll, labor costs are out of control causing less payroll hours to be spent in the stores - the customer is now demanding e-commerce such as Curbside Pickup. Curbside Pickup services in a higher service selling environment store like Best Buy, or even Nordstrom are a minimal cost, usually picking one or two items and although the store doesn't get to try to "upsell" add on items they aren't spending any more in labor to service that customer than they would in the building. But for a customer shopping online for many items, as they do at a grocery store or a mass discounter like Walmart or Target, is a completely different story. Somebody has to walk up and down all the aisles selecting everything the customer buys, then bag it up, stage it somewhere, and finally take it out to the customers vehicle. The prior service level would have been maybe 2 minutes for the cashier at the register to scan and bag. Now you are talking about 10 to 15 minutes per customer in payroll, and the customer expects the same price. Now technology helps a little bit here - the stores are now "batching" orders with special carts that have multiple dividers so they can save footsteps by pulling multiple orders at the same time if the store gets a "wave" of orders to fill - but even then they are never going to get more than 7 or 8 orders pulled in one labor hour. And the larger the store the longer it takes, which hurts Walmart more than Target or the grocery chains because they have the largest boxes overall across their chain. Walmart has stopped building 250K square foot supercenters and has built a new prototype in Lake Elsinore, CA that fits the highest SKU count in their chain into a building that has a sales floor of only about 150K, narrow aisles, "Airport style signage" so the customer can find product without help, and about 30 new self checkout "pods" but only two full service checkout lanes, one of which is always closed. The stores will continue to reduce any customer facing service area (no service deli, bakery, etc) and cut front end checkout payroll to nothing to fund these highly costly, unproductive e-commerce services. Register lines will get longer or there will be forced self checkout as we see in that new Walmart prototype. In a way it creates two classes of customers, the e-commerce customer who gets white glove service, and the in store customer who gets a dirty messy store and has to ring themselves up or wait in a mile long line but both pay the same.
Wall Street says stores can't spend more on payroll, plus the payroll cost goes up so they have to have less hours/more productivity, and now the customer demands more labor intensive service than they've ever received before. Something has to give here.