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How the Tight Labor Market is Threatening Retailers’ Holiday Hopes

Along with other key economic metrics, the 4 percent unemployment rate has retailers dreaming of a profitable Christmas. With more money in their pockets and more confidence in their economic futures, it’s likely consumers will be in the mood to spend.

But there’s a flip side to that statistic: The current labor market may leave the type of available, educated and helpful seasonal applicants they want in short supply.

“The retail industry is facing a tight labor market,” said Jack Kleinhenz, chief economist for the National Retail Federation. “According to the most recent data that the [Bureau of Labor Statistics] produced, there were 776,000 job openings in retail at the end of May. At the same time, we hired 742,000 people. It’s an indication of a healthy industry and an indication that firms need to gear up earlier for holiday.”

And that’s just what Kohl’s has done. The department store lead the pack with an announcement in June that it is looking for seasonal help.

“We are hiring seasonal associates earlier than ever to ensure our teams are fully staffed, trained and ready to support peak shopping seasons,” Ryan Festerling, Kohl’s executive vice president, human resources, said in a statement.

In addition to hiring for more than 300 doors, the retailer is also giving current employees dibs on additional hours.

Allowing employees to pick up extra shifts is how Walmart has staffed up for the holidays in recent years. Though the company hasn’t announced its plans for this year, Justin Rushing, Walmart’s director of corporate communications, told Sourcing Journal, “One of the benefits to this approach is that the associates in our stores have been trained and understand their local stores and customers.” Ultimately, he said customers end up better served.

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That correlation between better service and healthier sales isn’t lost on the retail community. In fact, the industry has finally given up some of its preoccupation with experiences—often sideline activities like manis and makeovers that have little to do with shopping—in favor of a focus on the experience itself. It’s a slight distinction but an important one, especially at the holidays.

“The biggest thing is it is super critical to have properly trained and motivated employees to improve sales and customer satisfaction and moral,” said David Naumann, vice president of marketing at BRP. “Happy and helpful sales associates are the key to driving traffic and sales. It really improves customer satisfaction.”

However Kleinhenz said the “fluid labor market” gives potential workers lots of choice, meaning the competition is stiff.

To land—and keep—the best workers, stores will have to get creative. And some have already started down this path with Target boosting its starting hourly wage to $12 this spring and Walmart following suit with a new minimum of $11 an hour along with additional perks like parental leave and a one-time bonus for select employees.

Naumann says cash is as good an incentive as anything else, especially for anyone living paycheck to paycheck. “The one thing that motivates them is to make more money, so pay raises and bonuses and other things based on performance will go a long way to motivating performance and retention,” he said, adding store discounts and referral bonuses work too.

In a tight labor market when stores are often asking folks to give up weekends and evenings, Naumann said if you find someone good, it’s worth the money to keep them happy. “You don’t want someone to start and then jump ship for another retailer who’s paying $1 an hour more,” he said.

While offering more money is an obvious choice, Naumann said don’t underestimate the value of providing training. “Often the reason why [employees] quit is because they don’t feel like they know what they’re doing or don’t feel comfortable navigating the systems they need to,” he said. “Really it’s about making sure you offer adequate training so your employee has more information than your customer has.”

As retailers weigh what lengths they’re willing to go to in order to attract, train and retain employees, Naumann said they need to keep one thing in mind.

“The stores that staff properly will outperform other stores,” he said. “The last thing you want to be is understaffed and turn customers away because of long lines or because they can’t get their questions answered.”