973-994-9494

Headlines Depict Drastic Job Loss for Retailers – John Mellage, CPA and Chris Martin, CPA

A John Mellage and Chris Martin at Sobel & CO. note in this blog, the drastic drop off of available jobs in the retail sector is not late breaking news.

Yet, as the trend continues to grow unabated, supported by statistics that increasingly point to the challenges facing the retail industry, we cannot ignore the implications for retailer owners as well as their vendors, customers and the national economic landscape.  Although there is nothing ‘cutting edge’ about this discussion, retailers and their professional advisors like John and Chris at Sobel & Co. must face the challenges.  Similarly, significant changes have rocked manufacturing, publishing, mining and more over the decades and now it is the retailers who will be looking for new strategies and innovative business models. But quoting statistics that sound the alarm bells is probably not an adequate solution to such a complicated concern.

The background

Since 2007, the private sector added 2.4 million new jobs while at the same time retail lost 60,000 jobs, according to an article, “the Silent Crisis of Retail Employment” (authored by Derek Thompson and published two years ago in The Atlantic). Given the astounding impact of the retail world on the US economy over the years, it’s hard to imagine that this is even possible. In fact, the retail industry as a whole has the distinction of being the most important contributor to the economic landscape throughout the second half of the 20th century.  People love to buy ‘stuff’ and retailers have always been delighted to fuel that appetite, offering more and more items on overflowing shelves. But times are changing a bit.

What is driving the latest drop in retail employment?

Based on hundreds of articles written that address this complicated issue, it seems as if there are three main challenges that currently impact shoppers’ buying habits, which in turn, is impacting the curtailing of retail jobs.

The first is need. As we move from a consumer society that has always focused almost solely on the desire for tangible items to one that is trying to manage the costs of the intangible (college tuition, healthcare or insurance, for example!), spending patterns are slowly changing.  Even recognizing this new focus, people still need real “stuff.” But how, when and where are they shopping?

Purchasing patterns are evolving based on the skyrocketing impact of technology. Today’s consumers can shop from anywhere – as long as they have a ‘device’ and an internet connection.  While many people continue to enjoy the shopping experience, there is every expectation that these numbers will diminish going forward. And technology is not only influencing online versus in-store shopping. Technology is also affecting the in-store experience with the introduction of self-service kiosks, iPads and other automated efficiencies that make it difficult to justify having so many customer service employees.

And lastly, there is the issue of cost coupled with convenience to deal with. So while many retailers – large and small – are struggling to hold onto their brick and mortar audience, super retailers are slower to feel the squeeze.  This is the third component that supports the downward spiral of retail job losses.  Those consumers who value convenience and cost can purchase quite literally almost any item they need, from AAA batteries to pet food to toilet paper to shoes and apparel, from super online retailers like Amazon and other internet sellers.

Is there any good news?

Just one month ago, Fox Business featured an article by Anne D’Innocenzio entitled “Retail Store Job Cuts Deepen as More Buyers Migrate Online.”  And although the lead paragraph cites that retail stores are eliminating jobs at the sharpest pace in more than seven years, there remains a silver lining that should be considered.

Retail shopping is not ending as a way of life. It is, however, being conducted according to a new business model.

One change predicted is that some retail stores (especially grocery chains) may shrink as more staples are purchased on line. This shift will require knowledgeable employees who can add value in a boutique environment where shoppers are looking for limited, specialty items. They will be more demanding but may require fewer sales staff to address their needs.

As the retail world continues to evolve into an online platform, some economists suggest that e-commerce is fueling new opportunities just as older, in-store jobs are disappearing.  Michael Mandel, who has earned a Ph.D. in economics from Harvard University and served as the  chief economist at BusinessWeek in 2004, estimates that the e-commerce sector has been responsible for 355,000 new jobs, as compared to the 50,000 in-store jobs that have been lost.  So the anticipation is that the jobs and the quality and depth of product knowledge may be altered, but the retail jobs will remain.

The impact of a digital, technology-based world cannot be overlooked. In fact, this computerized environment may present new alternatives – as long as we are able to adapt, be creative and innovative, and embrace change rather than fight it.  Those business leaders with a strategic vision for the future will likely be more successful that those who do not understand that you cannot stop progress.   In his famous white paper entitled, “Marketing Myopia”, Theodore Levitt addressed this very issue decades ago in 1960 in Harvard Business Review, admonishing those who refused to see change coming and who steadfastly held onto the world they were comfortable in. Like those buggy whip manufacturers who were blindsided by the popularity of the automobile, retailers need to do their best to be well positioned for whatever is around the corner!

Special thank you to some websites referred to in this article by John and Chris include:

  • Grocery Stores: The Best of America and the Worst of America by Laurel Dalrymple. May 15, 2017
  • Where Did All the Retail Jobs Go? By Derek Thompson. February 6, 2015
  • The Silent Crisis of Retail Employment. The Atlantic. Derek Thompson. April 18, 2017
  • Retail Store Job Cuts Deepen as More Buyers Migrate Online. By Anne D’Innocenzio. April 8, 2017
  • Bloomberg. The April Jobs Report. Patrick T. Fallon. May 3, 20