Grocery retailers can’t find the people they want for the jobs they need, and some workers are leaving. For an industry driven by people, the challenge is enormous. Yet, in a highly competitive postpandemic labor market, evolving the sector’s talent model focused on the employee experience, digitalization, and reskilling can make the grocery workforce an even more valuable source of competitive advantage—if retailers invest in getting it right.
While grocery retailers employ more than 5.6 million people in the European Union,1 they face two critical problems: high demand for new skills and roles—made even more difficult by a shortage of available talent—and high attrition rates for existing employees. It’s a labor spiral that presents a huge challenge, but an enormous opportunity to create value if grocery retailers evolve their talent models to the new reality.
The grocery sector faces long-term challenges on three fronts:
- Cost pressures are increasing. Some of the factors behind today’s tight labor market are well documented, from pressure for wage increases amid inflation, talent shortages, and increased competition, to the rise of absenteeism and attrition in the wake of COVID-19, to the need for more flexible labor scheduling. These challenges, combined with lower market growth, point to a need for greater efficiency and productivity.
- Automation opportunity is high compared with other industries. More than one-third of grocery retail tasks could be automated over the next eight years.2 Yet very few jobs can be fully automated, meaning the challenge is not about eliminating jobs but about determining how much they will change—and how workers can change with them.
- The value model is shifting. The way value is created in grocery retail is being transformed by analytics and the rise of digital, notably by e-commerce and new propositions such as instant delivery, and by demand for sustainability, requiring greater collaboration with suppliers as well as new product skills. These and other dynamics, including partnerships and ecosystem collaborations, are forcing employees to learn new skills as roles evolve and pushing companies to adapt their operating models.
The pandemic has dramatically accelerated these trends, leaving grocery retailers with little choice but to transform their people models. The upside? The sector can not only address these challenges but also drive sustainable competitive advantage with talent.
How the grocery workforce is changing
These trends have upended the grocery retail industry. Companies are being forced to reimagine and redesign grocery roles as physical and manual tasks have declined in importance and the need for technological and social skills, adaptability, and the ability to master various tasks continues to rise (Exhibit 1).
These skills are central to the ways in which grocery workers’ responsibilities are changing. How companies equip and empower employees will determine their success in attracting and retaining talent.
New and changing roles
New roles are being created as the grocery sector evolves, expands into adjacent business areas, and introduces technology and automation. The acceleration of online sales and instant delivery, for example, brings a need for in-store logisticians and last-mile delivery workers. At the same time, some roles are growing and evolving, requiring different skills than they did in the past. In the areas of commercial, digital, and logistics, there’s an increased demand for more advanced technical and analytics skills in pricing, digital marketing, and planning roles. Due to increased adoption of self-checkout, for example, the demand for cashiers has long been believed to be declining. However, in practice, cashiers’ social and emotional skills can bring a human touch to customer service, and tech savviness can lead to quickly taking on new tasks, such as online-order fulfillment. Still, physical work is very relevant in the role.
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Workforce retention
Global attrition in grocery retail jumped from 40 percent in 2019 to about 60 percent in 2020, according to the Food Industry Association—despite an increase in average wages and benefits for full-time employees. While the industry has spent upward of €13.5 billion to keep workers, it’s clear transactional pay is not sufficient: workers are looking for deeper relational elements and are placing significant emphasis on feeling valued by managers and organizations, on schedule flexibility, and on greater potential for career advancement.
Talent attraction
All industries are seeking new roles and skills, vexing an already tight labor market in which grocery retailers are already battling margin pressure. The sector has responded with significant salary increases. Lidl, for example, announced it was allocating more than €20 million toward pay raises in the United Kingdom as part of its investment strategy for talent attraction and retention. Meanwhile, Mercadona announced a 5 percent salary increase for its workforce. While attracting talent presents a challenge for grocery retailers, its importance also speaks to the value of the experience and training people receive in this sector. Other sectors often value grocery workers’ skills, from customer service and people management to emotional and social intelligence.
What grocery retailers can do
Against this backdrop of short- and long-term challenges, it’s no wonder that according to our research, around 40 percent of grocery CEOs spanning the industry identify people as a priority topic today, compared with around 25 percent last year. Grocery retailers have no choice but to transform their approach to talent, and we’ve identified six strategic moves they can take to navigate the transition to a new people model.
Reduce short-term attrition by addressing the employee experience
There’s a disconnect between the factors employees regard as important and those employers think are important (Exhibit 2). If the past 18 months have taught us anything, it’s that employees are craving investment in the human aspects of work: better pay, benefits, and perks have become table stakes. What employees are really seeking is to feel valued by their organizations and to have social and interpersonal connections with colleagues and managers. To achieve this, proper onboarding and ongoing motivation for in-store personnel are critical. Leaders should take note: you can’t fix what you don’t understand, and truly investing in the relational elements that make employees feel valued and comfortable at work is the key to arresting the slide.
Anticipate future talent demand, and invest accordingly
The nature of all grocery roles is shifting—not only due to elements within the control of companies, such as the degree of automation, but also due to changes largely beyond their control, such as consumer behavior. For example, few grocers would have anticipated such rapid growth in e-commerce channels, and most are still trying to understand how to attract and retain talent with experience in this field. It’s critical to invest early in quantifying and planning for talent needs over a three- to five-year time horizon. With a plan in place, it’s easier to be proactive and adjust if needed, rather than reacting to events as they happen and always playing catch-up. For example, one Southern European grocery retailer plans to double the number of people in certain positions, such as data scientists and digital-store-picker operators. At the same time, it is also recruiting for roles not previously available in the company, such as robotics technicians.
Navigating the headwinds: The State of Grocery Retail 2022: Europe
Differentiate investments in attracting and retaining core digital talent
Grocers able to attract and retain digital talent, such as data engineers, data scientists, and full-stack developers, have realized the needs and expectations of digital talent are unique and specific. Organizations that win in this space focus on anticipating digital-talent needs, on linking compensation and benefits to the value digital roles bring to the organization, on developing communities of practice with effective technology talent functions, and on investing in digital-specific career paths to highlight growth opportunities.
For example, one retailer created a differentiated employee value proposition for digital roles. The digital employee value proposition was focused on three pillars: a renewed company culture (“a great company” that fosters agile ways of working and develops digital communities), digital-specific learning and career development (“great opportunities” built on the foundations of an exciting and future oriented technology stack), and tailored incentives (“great benefits” including nonfinancial benefits such as participating in external digital events and forums and flexible location rules).
Reskill and upskill, which are key value-creation levers
There are different levers to manage the transition to the future workforce, including talent acquisition, redeployment, and partnerships. Today, organizations are increasingly investing in upskilling and reskilling talent, as according to our research it can be about 20 to 30 percent more cost-effective in the long term than layoffs and hiring—and these efforts also strengthen employee engagement and overall productivity.
One Southern European grocery retailer conducted a strategic workforce transition effort to ensure availability of resources and skills to deliver on its business priorities. Around 50 percent of its workforce required upskilling, with a particularly pronounced need in functions such as commercial and in-store. In response, the retailer created an at-scale reskilling program and complemented it with a talent acquisition initiative for key areas such as logistics.
In our experience, successful reskilling and upskilling programs include:
- a well-defined, long-term strategic workforce plan anchored in the business strategy that outlines the demand for existing and new roles and skills
- investment in redesigning roles for the future, in understanding how automation and other trends will affect each position’s key activities, and in aiming to reduce time spent on non-value-added tasks
- focused capability building for talent in low-demand, high-supply roles to transition those employees to high-demand, low-supply roles
- mechanisms to deploy talent and to support the professional development of talent over the long term
- partnerships with external skilling organizations, which can significantly accelerate these efforts and provide more scale and cost efficiencies
Consider how Walmart invested $4 billion in a reskilling program over four years. Frontline hires are now required to start with a certificate program in basic retail and emotional skills. In addition, tenured employees can take part in Walmart Academy and the “dollar per day college,” which allows associates to earn college degrees in retail management. There has also been a shift in the past few years from hourly wage roles to more full-time roles in Walmart’s retail stores, improving work-life balance for associates, building more team-based ways of working in stores, and providing opportunities for better mentorship. These moves are intended to signal to the labor market that Walmart cares about growing and developing its workforce, making it a “career building destination.”
‘Acqui-hire’ to accelerate the time to impact
Partnering or acquiring companies with key capabilities is one of the fastest ways to accelerate talent acquisition at scale, although it has certain risks that need to be managed, including cultural integration. For example, Ahold Delhaize acquired FreshDirect to expand its omnichannel competitiveness in the US.3 On the back of this acquisition, Ahold Delhaize aims to double online capacity and increase its market penetration.
Make people a strategic priority for the C-suite
When talent management becomes a strategic priority that affects value creation and the long-term sustainability of business models, it’s no longer just an HR responsibility. It should a priority for the C-suite, with leadership from the very top.
Companies have increasingly focused on people since the outset of the pandemic, and grocery retailers are no exception. Yet as an essential industry, the sector is under particular scrutiny. Transforming the people model is challenging but necessary, and getting it right can deliver sustainable competitive advantage.
