When you examine issues of employee engagement in the retail industry, two things must stay top of mind.
The first is that retail has experienced an incredible degree of economic and political turbulence in the past decade, and those factors have an undeniable impact on the employee experience. The second is that retail employees are not faceless workers. According to the New York Times, one in every ten Americans works in the retail industry. Even if you personally do not work in retail or manage employees that do, you know someone in your life who does. Issues of retail employee engagement have a material impact on people you know, if not yourself.
When the Great Recession hit in 2009, retail, like many other industries, suffered heavy losses. At first, stores shuttered and employees were laid off in response to the serious blow these organizations had been dealt. But unlike other industries, it was strength and growth in the retail sector that helped the U.S. slowly recover afterward. Today, retail faces yet another contraction that employees must bear the brunt of, and it’s unclear how long it will last.
A brief overview from The Atlantic notes three things: e-commerce sales are growing, and eating larger shares of those in brick-and-mortar stores; America built more shopping centers than merited by consumer demand; consumers today are more inclined toward experiential purchases, like concerts, nights out with friends, and vacations, rather than material goods. Last year, per Retail Dive, this all translated to 21 major retailers filing for bankruptcy, 9,000 individual store closures, and 170,000 retail employees out of a job.
Retail employee engagement and the customer experience
When this turbulence subsides, the existence of brick-and-mortar stores is not in question; if it was, e-commerce giant Amazon wouldn’t be opening physical locations as recently as January of this year. However, the experience of brick and mortar locations may be what changes. Right now, widespread store closures are putting pressure on the ones that do stay open to create experiences that foster customer loyalty and satisfaction.
While leaders in retail can craft strategies that meticulously address market factors, it will be for nothing if employees do not feel engaged. When it comes to matters of the customer experience, research lends credence time and again to an oft used, but no less true expression: the employee experience defines the customer experience.
The employees that operate retail stores are the face of the business. They have the closest interactions with customers, and thus shape customer perceptions of the organization. On a day-to-day basis, they will help execute the customer-facing component of business strategy. But if employees’ emotional commitment to the organization and their daily work is weak, then the execution will be weak as well.
People who take employee engagement seriously understand this connection. According to a Harvard Business Review study, 77% of “high prioritizers,” or strategists who believe engagement is important, say employee engagement has a considerable impact on customer satisfaction.
For people who aren’t “high prioritizers,” this connection isn’t just the confirmation bias of people looking for results in a strategy they’ve already invested in. At the National Retailer Federation Big Show 2015 conference, the Answers Corporation announced it had discovered a causal link between retail employee engagement and customer satisfaction in retail.
To understand why this is so significant, it’s important to note that similar studies of this nature most often report correlational links, rather than causal ones. Correlational studies will show that two factors are related, each showing significant trends in a direction either positive or negative. But they cannot say for certain that a change in one factor causes a change in the other, because a perceived change may be the result of influence from an unobserved factor.
So when the Answers Corporation reports a causal link between retail employee engagement and customer satisfaction, it is saying that, after isolating for any external factors, it found that high employee engagement levels directly cause higher levels of customer satisfaction. Clearly, then, if leaders in retail raise employee engagement levels, they gain the competitive advantage in the marketplace, right? Yes, but it’s a little more complicated than that.
Employee engagement is a reflection of effects, not causes. It is an end, but not a means in and of itself. A strategy to improve retail employee engagement will not just influence engagement as a singular metric, but rather a variety of conditions that improve the whole employee experience. And retail’s recent turbulence has left plenty of room for improvement.
Retail turnover is breaking records–bad ones
Retention is a commonly accepted signifier of employee engagement, but in retail a high turnover rate is expected. To some degree it’s even considered healthy. While no one necessarily wants to lose employees, attrition helps cycle unmotivated, unproductive workers out of retail stores, and voluntary turnover from more driven employees often results with them landing at a location that’s the right fit.
However, retail turnover has been trending upwards as of late. A survey from the Hay Group division of Korn Ferry showed the turnover rate for hourly store employees climbed to 65%, with the rate for employees in distribution positions at 23%, and corporate positions at 18%. These rates are reportedly the highest they’ve been since the Great Recession.
Turnover is turning skilled employees away
Another study looked at turnover on a global scale by examining data from LinkedIn user profiles. It found retail had the second highest turnover rate of all industries at 13%, topping the worldwide average of 10% for turnover. The generalizability of this survey for front line employees may leave room for skepticism. Much of LinkedIn’s core functionality still revolves around corporate networking, so people in store clerk and cashier roles may be less apt to use the service.
However, the survey’s other findings corroborate reporting from the New York Times regarding employee attitudes during the retail apocalypse. Namely that while in the past it was common for employees to hop from one store to another, this time around many aren’t returning. The LinkedIn study found many are seeking out new careers, as only 35% of job changers in retail stay in the industry.
One way to solve the turnover issue lies in focusing on professional development. A lack of opportunities for advancement is cited as the top concern for job changers, and in retail even basic training can make a difference here. One study shows that nearly a third of retail employees receive no formal training whatsoever, despite 92% reporting that it positively impacts their job engagement. Even in lieu of formal education programs, managers can do a better job of identifying employees that want to advance and providing them opportunities they need to succeed. While we’re on the subject of managers….
Managers are responsible for retail employee engagement
According to Gallup, you can attribute a 70% variance in employee engagement to a manager. In other words, managers’ influence over retail employee engagement is so significant that they can make the difference between a highly or poorly engaged workforce.
As non-desk employees, front-line retail workers are often considered too hard to reach compared to their sedentary counterparts. Many, for example, do not have corporate email addresses, and thus miss out on important organizational communications that relay organizational goals, the type of messaging that helps contextualize daily work and imbue it with meaning.
It’s not uncommon for communications strategies to lean on managers to relay this information to non-desk employees face-to-face. Gallup’s research shows that the managers who do this well have the edge in engagement.
Since non-desk retail employees are typically underserved by these communications, it’s not surprising to learn that only 41% report knowing what their organization stands for, or how it’s different from competitors. However, when managers take time to directly communicate this, it helps employees navigate tense interactions with customers with ease. What’s more, their research shows these managers are more likely to have engaged employees when they go a step further and establish work priorities and performance goals with team members.
Employee rewards don’t feel rewarding anymore
The increase in e-commerce purchases is that consumers are readily engaging in “showrooming” as a shopping practice. Showrooming refers to when a customer will research and select products in a brick-and-mortar store, but make their final purchase on the internet. According to a survey from Accenture, 63% of consumers participated in showrooming during the holiday season of 2013. This share is likely to have increased in the time since as e-commerce has only grown more ubiquitous and user-friendly.
A consequence of showrooming is that it stymies the rewards and recognition programs designed to motivate better employee performance. Since the customer’s purchase occurs online, no in-store employee can be attributed to the sale, though they likely still spent the time and energy emotionally selling the customer on the product. Consequently, employees who effectively created the sale go unrecognized for their efforts.
Two things can happen on this front to make employee rewards feel more rewarding. The first is that formal incentive programs need to be reconfigured in a manner that accounts for the effects of showrooming. Benchmarks and criteria for what constitutes formal recognition may need to fluctuate depending on store demand.
The second is that formal praise can be supplemented with micro-recognition–informal, social praise that celebrates wins big and small. All retail employee engagement programs can benefit from robust micro-recognition practices, which cultivate an intrinsic motivation in employees that can motivate them to be three times more engaged than employees motivated by money.
While retail’s future beyond these market fluctuations remains veiled to us now, employees will always be needed, in some capacity, to operate and manage brick and mortar stores. When it comes to matters of people management, research and real-world scenarios have shown repeatedly that the organizations who rise above the competition are those that place value in employee engagement.