RSR has been saying for years that the retail store model isn’t working very well anymore. It presumes a low-paid, transient, mostly part-time workforce that neither gets fringe benefits nor any real career-pathing.

At the same time, in survey after survey, retailers have been telling us that their employees are critical to their retailing success. This is the most fundamental of retail paradoxes (yes, Virginia, paradoxes like these are how this newsletter got its title fourteen years ago), and it seemed as though it would never be solved.

Still, unless the economy was at all-time highs, there seemed to be an endless stream of applicants willing to take jobs in retail stores and distribution centers. They, too, didn’t mind the lack of commitment. They came, they went away and went on to bigger and better things.

Then along came COVID and all the world changed. Those “fungible” workers suddenly became front-line workers, and for many, especially in the hospitality sector and distribution centers, the low pay just wasn’t worth it. It wasn’t worth the risk of getting sick, and it wasn’t worth it to leave sick family members at home. COVID really did change everything.

I’ve had people tell me the problem was that the government was subsidizing the unemployed, and so fundamentally “lazy” workers just walked away. One fellow, whose name I can’t remember posted a diatribe against perceived government “giveaways” causing low employment rates in Florida. He was shocked when I suggested that the problem was quite simply, people weren’t being paid enough. His response was (I swear!), “And you’re a Managing Partner? What’s wrong with you?” In other words, he presumed it was a badge of honor for management to pay the lowest possible wages and demand that the government avoid any kind of assistance for those who weren’t working. In my case, he was wrong. I don’t consider greed a badge of honor. Being me, I said so… in a not so nice way. Swat!

Now we are hearing the same song sung across other parts of the ecosystem as our inventory woes remind me more and more of the Soviet Union in the 1970’s (yes, I was there and saw the empty shelves with my own eyes). The imbalance of wealth, which many have been fretting about for some years is coming home to haunt us and the lack of a large enough low-paid workforce is being blamed for almost everything.

Supply chain woes? A big shortage of truckers, who have decided the pay and the hours just aren’t worth it. Unloading container ships? Not enough longshoremen. Hospitality? I’ve haven’t seen so many “Help Wanted” signs in restaurant windows in years, with a line underneath saying, “We offer good benefits.” Wow.

Retailers have woken up. They are trying really hard to gear up for the holiday season (assuming they get some product to sell). This quote from Fortune magazine tells the tale:

Signing bonuses have typically been a favored tactic of corporations vying to attract a star executive or a sports team luring an All-Star. But such enticements are now becoming the norm for low-wage retail workers in a supertight labor market heading into a frantic holiday season.

Kohl’s is offering signing bonuses of up to $400, while Macy’s is delivering up to $500 in referral bonuses to staff who help it land a hire. Meanwhile their well-heeled rival Amazon, which wants to hire 150,000 seasonal workers, is outdoing the competition with $3,000 enticements to sign on. Amazon CEO Andy Jassy told the Amazon Accelerate conference on Thursday that this was the “hardest” job market he’s seen in his 25 years at the company.

Am I sympathetic? Well, if I’m honest, no, I’m not. We really did see it coming. We knew that customer expectations were changing and retailers were going to have to walk the walk when it came to worker training and pay. We just didn’t anticipate COVID and its sudden shift in worker consciousness.

Some companies (I won’t name one in particular right now though it is mentioned above) thought it was okay to ask employees to pool their Personal Time Off (PTO) so they could avoid adding payables to their corporate balance sheets. That’s how PTO works, and in fact, it’s a prime reason behind the “use it or lose it” strategies around vacation and sick time many companies employ. That unmentioned company is still trying to prove with TV commercials that it’s really a good place to work. Wouldn’t it have just been easier and cheaper to pay the people, for heaven’s sake?

Not everyone took that tack. Companies like Walmart and Target saw the change early. They made investments in automation prior to the pandemic that helped drive money to the bottom line and also gave them breathing room to pay bonuses to those workers willing to stay on. They are still paying those bonuses to seasonal workers, even as they are creating career pathing for their permanent staffs. And they continue making investments in technology to free up the capital they can use to pay their workers a living wage.

Now, I suspect about a third of you are really offended at my use of the term “living wage.” Sorry, it is what it is, and it’s not an accident that potential workers are saying “This job just ain’t worth it.” In some parts of the country, there’s a sense that the “gig economy” is just another cheat against workers. California in particular has some real issues with the gig workforce as contractors. It’s not my observation (and I always ask). For the workers themselves, there’s absolutely more of a sense of control. If I’m an Uber driver, I just turn off my phone, and I’m off shift. Or I decide I want to see a part of the city or state I haven’t seen and turn ON my phone, getting a busman’s holiday on a nice day.

The long and the short of it is this:

• Retailers need to spend on technology to do routine tasks and ultimately free up cash
• Those workers they need must be evaluated, selected, trained and retained so they feel like they matter and the work they do is valued. Fungible is so 20^th century. It’s over.

People, processes, products and technology. These are retailers’ core needs. We don’t have a lot of room left. We’ve got to get it right. Otherwise, that old Johnny Paycheck song will keep coming back to haunt our entire ecosystem. The power dynamic has shifted. It’s time to change.