[US] Major retailers face off in 'labour hoarding' war over hourly employees

A quiet war is being waged among America's largest retailers and under-appreciated hourly workers might be the winners. Slower sales growth, rising interest rates, and increased uncertainty are forcing such companies to streamline operations and search for cost-saving measures, MSN reports.

According to a count maintained by Layoffs.fyi, tech sector employers have laid off more than 120,000 workers in 2023 alone to boost profitability and satisfy investors. The word from retail C-suites this past earning season, however, paints a very different picture.

Retail executives are reportedly insistent that the substantial investment in their front-line workforce over recent years is here to stay therefore any cost savings will have to be found elsewhere. Many are even doubling down with billions of dollars in commitments to further improve compensation, extending the ongoing trend of "labour hoarding" in the industry.

Labour hoarding is the practice of an employer keeping workers they might otherwise cut in a downturn because hiring and training replacements could lead to missed opportunities or market share when things start to improve.

On March 2, supermarket giant Kroger announced that it would spend $770 million on raising wages in 2023 after previous spending of $1.9 billion on increases since 2018. CEO Rodney Mullen stated that the company's average hourly rate is now more than $18 following a 6 per cent increase in 2022.

Costco was already paying industry-leading wages by the start of the pandemic and it has delivered three off-cycle wage increases in the past 15 months, according to CFO Richard Galanti during Costco's March 2 earnings call. 

"Competitive compensation continues to be table stakes," Best Buy CEO Corrie Barry said on March 2 and she added that the electronics giant has raised hourly pay roughly by 25 per cent over the past three years. Ms Barry also gave no hint that any of those costs would be rolled back as demand for expensive televisions and other high-tech products falls.

Instead, she spoke about the key role front-line teams play in the success of the company.

"Sometimes I want very rapid fulfilment of my product - I want to pick up in store and have the confidence of grabbing that product. Sometimes I want a deeper, more immersive experience," she said of the brand's shoppers. 

"It's why we are investing more in our front-line associates who are the ones who are right there, meeting the customer in the moment."

Companies such as these have plenty of incentive to hoard all the labour they can, as the battle over labour translates directly to the larger war for market share.

"Customers also decide where to shop based on the freshness of product and the friendliness of associates. And that's part of the overall value equation." Kroger's Mr Mullen said. "I really think it's important for you to look at all those together."

With these sentiments, Kroger, Costco, and Best Buy now join a list that previously included Walmart, Target, Home Depot, and Lowe's, who have reportedly expressed similar sentiments this earnings season.

In January Walmart announced it would increase its minimum wage from $12 to $14 per hour, bringing the US average hourly wage up to $17.50.

In February, Home Depot said it will spend $1 billion to increase wages for hourly workers, bringing its starting wage to at least $15 an hour nationwide. The company said it would pay commensurate raises to current employees.

Lowe's followed suit last week, reporting that employee compensation increased by $3 billion since 2018, and would grow by another $1 billion over the next three years.

While Target did not announce a pay increase, the company said cuts to "the best team in retail" were off limits as the company seeks $2 billion to $3 billion in operations cost savings over the next several years.

There are now two job openings per unemployed worker and staffing the front lines has reportedly become a zero-sum game for retailers who say they have learned hard lessons about how sales suffer when stores are short-handed.

The pay at such stores remains comparatively low, the work is often physically demanding and the hours inconsistent, however, these developments do reflect a significant shift in the way retail employers think about their workforces.

It isn’t clear which company will gain the edge in the retail battle but it is workers who are poised to win overall.

Source: MSN

(Links and quotes via original reporting)

A quiet war is being waged among America's largest retailers and under-appreciated hourly workers might be the winners. Slower sales growth, rising interest rates, and increased uncertainty are forcing such companies to streamline operations and search for cost-saving measures, MSN reports.

According to a count maintained by Layoffs.fyi, tech sector employers have laid off more than 120,000 workers in 2023 alone to boost profitability and satisfy investors. The word from retail C-suites this past earning season, however, paints a very different picture.

Retail executives are reportedly insistent that the substantial investment in their front-line workforce over recent years is here to stay therefore any cost savings will have to be found elsewhere. Many are even doubling down with billions of dollars in commitments to further improve compensation, extending the ongoing trend of "labour hoarding" in the industry.

Labour hoarding is the practice of an employer keeping workers they might otherwise cut in a downturn because hiring and training replacements could lead to missed opportunities or market share when things start to improve.

On March 2, supermarket giant Kroger announced that it would spend $770 million on raising wages in 2023 after previous spending of $1.9 billion on increases since 2018. CEO Rodney Mullen stated that the company's average hourly rate is now more than $18 following a 6 per cent increase in 2022.

Costco was already paying industry-leading wages by the start of the pandemic and it has delivered three off-cycle wage increases in the past 15 months, according to CFO Richard Galanti during Costco's March 2 earnings call. 

"Competitive compensation continues to be table stakes," Best Buy CEO Corrie Barry said on March 2 and she added that the electronics giant has raised hourly pay roughly by 25 per cent over the past three years. Ms Barry also gave no hint that any of those costs would be rolled back as demand for expensive televisions and other high-tech products falls.

Instead, she spoke about the key role front-line teams play in the success of the company.

"Sometimes I want very rapid fulfilment of my product - I want to pick up in store and have the confidence of grabbing that product. Sometimes I want a deeper, more immersive experience," she said of the brand's shoppers. 

"It's why we are investing more in our front-line associates who are the ones who are right there, meeting the customer in the moment."

Companies such as these have plenty of incentive to hoard all the labour they can, as the battle over labour translates directly to the larger war for market share.

"Customers also decide where to shop based on the freshness of product and the friendliness of associates. And that's part of the overall value equation." Kroger's Mr Mullen said. "I really think it's important for you to look at all those together."

With these sentiments, Kroger, Costco, and Best Buy now join a list that previously included Walmart, Target, Home Depot, and Lowe's, who have reportedly expressed similar sentiments this earnings season.

In January Walmart announced it would increase its minimum wage from $12 to $14 per hour, bringing the US average hourly wage up to $17.50.

In February, Home Depot said it will spend $1 billion to increase wages for hourly workers, bringing its starting wage to at least $15 an hour nationwide. The company said it would pay commensurate raises to current employees.

Lowe's followed suit last week, reporting that employee compensation increased by $3 billion since 2018, and would grow by another $1 billion over the next three years.

While Target did not announce a pay increase, the company said cuts to "the best team in retail" were off limits as the company seeks $2 billion to $3 billion in operations cost savings over the next several years.

There are now two job openings per unemployed worker and staffing the front lines has reportedly become a zero-sum game for retailers who say they have learned hard lessons about how sales suffer when stores are short-handed.

The pay at such stores remains comparatively low, the work is often physically demanding and the hours inconsistent, however, these developments do reflect a significant shift in the way retail employers think about their workforces.

It isn’t clear which company will gain the edge in the retail battle but it is workers who are poised to win overall.

Source: MSN

(Links and quotes via original reporting)