The following article is another in our series that examines average employee turnover rates by industry. In this article, we hold the retail industry under a microscope to see what might be affecting employee turnover and retention rates, and why employees in this industry are seen coming and going so often.
Turnover in 2020 was much higher than in previous years due to the coronavirus pandemic. 2020 saw an overall turnover rate of 57.3% according to the Bureau of Labor Statistics (BLS). For context, the turnover rate was in the 42-45% range from 2016-2019, slowly creeping upward. The average turnover rate in the retail industry is slightly above 60%, according to the National Retail Federation. This high turnover rate translates into more than 230 million days of lost productivity and $19 billion in costs associated with recruiting, hiring and training, according to Human Resources Today.
Research by analytics company, Workforce Software, shows that operators have long known that turnover is an issue in their industry, and has pinpointed specific issues that have compounded the problem:
- Maintaining store processes and training in a high-turnover environment is difficult
- Lacking consistent store execution and employee productivity
- Needing help attracting and hiring good people
Turnover disrupts the quality of service, adds expenses to a business’s bottom line and can impact overall workplace morale.
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Variations of Retail Turnover
While the total turnover rate is close to 60%, according to the 2021 BLS report, each position within the retail sector has unique levels of separation. It’s important to note that in the United States alone, nearly 16 million people work in retail, per the BLS. That’s roughly one in 10 working Americans! Online publication, World at Work breaks down turnover at a granular level:
- Hourly store employees have the highest turnover rate at 65%
- Retail distribution positions have a turnover rate of 23%
- Corporate positions have turnover rates of 18%
The cost of turnover varies based on job title as well.
- For associate level positions, employers can expect to pay 16% of an annual salary to replace a worker. For an associate who makes $10 an hour, it would cost around $3,328 to replace them.
- It costs around 20% of an annual salary to replace a midrange position, like a manager. If a manager at your organization earns $40,000 each year, it would cost around $8,000 to replace them.
- For executive-level positions, organizations will pay around 213% of an annual salary to replace them. For example, if a CEO at your organization earns $100,000, it would cost $213,000 to replace them.
Revolving turnover compounds cost, meaning the higher the turnover rate, the more a business’s bottom line is impacted. It is critical for employers to get to the bottom of their turnover problems so they can protect their profits.
Factors That Contribute to Turnover in the Retail Industry
According to research by Harvard Business Review, hourly employees say they are most likely to leave their current position for the following reasons:
- Finding better opportunities or promotions
- The desire to make more money
Additionally, according to Home Depot’s 2019 Annual Survey, specific economic and industry trends impact their ability to maintain healthy staffing levels:
- Difficulty attracting, developing and retaining highly qualified associates while also controlling labor costs
- Wage inflation as a growing issue
- Inability to provide wages and/or benefits that are competitive within the markets
- Changes in market compensation rates adversely affect our labor costs
Home Depot’s survey adds, “We compete with other retail businesses for many of our associates in hourly positions, and we invest significant resources in training and motivating them to maintain a high level of job satisfaction. These positions have historically had high turnover rates, which can lead to increased training and retention costs, particularly in a competitive labor market. There is no assurance that we will be able to attract or retain highly qualified associates in the future.”
How to Take Control of Turnover in the Retail Industry
Even with a growing amount of sales and product research occurring online, research shows that online sales are expected to grow in 2021 to between 18% and 23%, so maintaining staffing levels and employee satisfaction in physical stores is still critical to an organization’s success.
To attack high turnover, the following strategies have become reimagined and fine-tuned by big-box retailers.
Improving Recruiting Practices
In a tight labor market, it’s easy to move quickly through the recruiting process, extending offers to willing participants without properly vetting their qualifications. Even in entry-level positions, taking the time to look for candidates who demonstrate qualities that will make them successful in their roles is an important consideration to decrease turnover.
Associates in the retail industry represent the customer-facing aspects of your business and therefore should possess characteristics like:
During the recruiting process, take time to administer assessments like Situational Judgement Tests (SJTs) to see how your applicants will fare in the role at hand. Taking action to assess candidates before hiring them can lead to candidates who fit better within their role, and therefore are less likely to turnover frivolously.
Focusing on Learning and Development
ncreasingly, organizations view talent management and employee development as a shared responsibility between business and HR. As a result, learning and development programs are becoming more abundant as they allow organizations to:
- Remain competitive
- Defend against skills shortages
- Increase worker productivity
- Decrease turnover
Major retailers have recently bound together to create RISE UP (Retail Industry Skills & Education), which is a program designed to offer employees ongoing support and training.
The pledge of RISE UP is to help workers secure the skills and training they need to land jobs in the retail sector and give them the tools to keep them rising through the ranks of the company. This attention to an underserved market is a great way to find talent, even as the labor pool is becoming more competitive and build loyalty with workers to mitigate turnover.
The RISE UP program is a collective of 21 merchants including:
- Neiman Marcus
- Under Armour
Finding and Implementing Employee-Focused Benefits
Over the years, Walmart has earned a reputation for paying their staff low wages and creating unreliable shifts when scheduling. In order to combat negative perception and ease its workers’ financial strain, they implemented a daily pay benefit, which allows workers to receive their earned but unpaid wages before payday.
Best Buy is another organization that deserves recognition when it comes to taking strides to reduce turnover through unique perks. Best Buy recently began targeting turnover by offering:
- Tuition assistance
- Backup childcare
- Paid time off for part-time employees
Innovative benefits can help differentiate your organization in a competitive marketplace. Benefits that speak directly to employee needs or concerns can help retain your staff. Why leave an employer when their benefits are the best in the market?
Shaping the Employee Experience
Employee experience is a hot buzzword in human resources right now. In a nutshell, employee experience defines how your employees feel about their experience throughout their journey with your organization.
By improving employee experience, or the way an employee feels about working at your organization, you can curb turnover. Payroll provider, Paychex, ran a study earlier this year to pinpoint ways organizations can successfully improve the employee experience.
The results showed that a daily pay option ranked as one of the top five ways for organizations to boost the employee experience.
Daily pay options are also proven to benefit recruiting, retention and employee engagement.
Our proprietary data shows that companies that offer on-demand pay:
- Fill open positions 52% faster than organizations who don’t offer an on-demand pay benefit
- Experience an average of 45% reduction in turnover among DailyPay users
DailyPay costs nothing for a business to roll out or maintain, which means organizations of any size can take advantage of the benefit without worrying about how it affects their bottom line.