The job market in the United States may have grown stronger in the past few months, but a closer look at the data suggests retailers face difficulties. As of May 2024, there were about 2.5 million more job vacancies than job seekers. That spells trouble for retail executives, who continue to see higher-than-average attrition rates within their frontline workforces.
Based on responses from more than 1,000 US frontline retail workers, our 2022 research outlined what workers want from their jobs and how retailers can meet those expectations. We’ve reexamined the problem with fresh survey data to see how workers’ needs and employers’ interventions have changed.
Attrition factors, or the circumstances that motivate employees to leave their jobs, have shifted: a lack of career development and uncompetitive compensation are now the two most important factors contributing to retail employee departures, followed by a lack of inspiring leadership. The following six charts help illustrate the state of frontline retail employment in the United States. They provide retail leaders with insights on how to improve engagement among frontline employees and managers, which has a quantifiable impact on both customer satisfaction and financial performance.
The road to recovery
The retail and hospitality workforce is still feeling the impact of the pandemic shocks of 2020. From February to April 2020, employment for the retail and hospitality industry dropped by more than 25 percent, compared with employment in January 2020. (Employment for all other industries dropped by about 10 percent.) By November 2021, employment in all other industries recovered to January 2020 levels and has since increased an additional 6 percent. Meanwhile, in the United States, employment for retail and hospitality finally recovered to prepandemic levels in September 2023 but still lags employment in other industries.
The slow pace of recovery in the sector may be attributable to a handful of factors. At the height of the pandemic, retailers were closed for months, which forced store employees to find jobs outside of the industry. When stores reopened, many former retail employees were deterred by in-person work. In other cases, former retail workers preferred the scheduling flexibility that gig work offered. With the larger drop in employment, the recovery was always going to be difficult for retailers. Yet our data continues to show that retailers’ employee value propositions are not meeting workers’ needs, which is likely contributing to the lack of workforce growth in the sector since January 2020.
A point of no return?
When we surveyed frontline retail employees in May 2023, 44 percent of these workers said they were considering leaving their jobs in the next three to six months, making them 1.2 times more likely to have done so than the average US employee. That gap improved slightly from the year before, when frontline retail employees were 1.3 times more likely to consider leaving.
But there’s an added wrinkle to the story: 72 percent of retail employees who decided to leave their jobs over the past three years have left the industry altogether. Consequently, retailers are competing for an unstable talent pool. Indeed, nearly every industry sees a quit rate that is lower than that of the retail sector. Gig and other nontraditional work options are sources of new competition, offering benefits that most retailers have not been able to replicate, such as flexible working times and locations.
Shifting priorities
In most other industries, one or two factors of attrition stand out; in retail, each of the top six or seven factors propelling attrition rates can have a significant impact on an organization’s workforce. The latest top attrition factors highlight the importance of “relational factors,” or the ways through which frontline retail employees interact with their managers, feel a sense of belonging, and see their impact within an organization.
Career development was the number-one reason frontline retail employees planned to leave their jobs in 2023, up from number two in 2022. Some retail employers have addressed this issue by offering more career development opportunities. One large retailer, for example, invested in college-level courses and skills certification for its frontline employees. It was a win–win situation: participants developed relevant skills and were four times more likely to stay with the retailer.
The shift in top attrition factors from 2022 to 2023 also reflects workers’ perceptions of the economy. Flexibility was a more pronounced factor of attrition at the peak of the COVID-19 pandemic, though it still remains important for employers and employees alike. Compensation became a more important factor of attrition in retail, now number two overall, as wage growth did not keep pace with inflation during much of 2022 and 2023.
Looking for leadership
In our latest research, we found that managers and nonmanagers were considering leaving their frontline retail jobs at similarly high rates. They reported common frustrations, with a couple of exceptions.
Inspiring leadership is important for frontline retail employees, but especially so for managers. Managers cited a lack of inspiring leadership more than any other attrition factor—and 11 points more often than nonmanagers did. Of the frontline retail managers who were considering leaving, more than four in ten saw an issue with inspiring leadership, highlighting the potential gap between field leadership and store managers, as well as a potential gap between store managers and their shift managers.
These leadership gaps have a cascading impact. Managers, including the dissatisfied four in ten, are responsible for much of what nonmanagers are seeking: career development, meaningful work, and a healthy sense of well-being. Unfortunately, frontline managers are being challenged as much today as they were at the height of COVID-19. During the pandemic, managers were required to enforce in-person protective measures and assume extra responsibilities, such as handling e-commerce returns when stores became logistics hubs. After a few demanding years, some inspiring frontline retail managers have left. Today’s managers struggle with hiring challenges, and their responsibilities are harder to manage in understaffed stores. In our experience, any frontline transformation must start with an investment in the manager role: they are the linchpin for change, yet they are under the most stress.
A close-up
Many of the best retailers study their employee bases with analytical approaches similar to the ones marketing departments use to understand consumers. A retailer, for example, conducted an attitudinal segmentation of its workers, grouping employees according to shared characteristics and perspectives about their work experiences.
The research revealed five unique cohorts among the retailer’s workers, each with a slightly different set of priorities. There was also a wide variation in intent to stay for the next 12 months, with a 43-percentage-point gap across groups. In two segments, which accounted for more than a third of the retailer’s frontline employees, less than 25 percent of employees intended to stay. Understanding what mattered most to each cohort (especially those who were more likely to stay) allowed the retailer to prioritize investments in its employee value proposition, in this case with a sharper focus on career development, supportive managers, and in-store culture. The retailer also found a strong correlation between employees’ passion for the retailer’s category and their likelihood to stay. This insight led the retailer to revamp its new-hire-screening criteria to identify enthusiasm for the products it sells.
Virtuous cycle
Investing in employee experience is not only the right thing to do for workers, but it’s also good for customers. We analyzed the employee experience (EX) and customer experience (CX) of over 100 retailers, using data from Glassdoor and the American Customer Satisfaction Index. Providing a superior CX can be elusive but less so for retailers that invest in their employees. We found that companies with a top-quartile EX are more than twice as likely as those outside the top quartile to achieve a top-quartile CX. Many levers exist to improve CX, but there are not many that can double the odds of success.
Yes, the happiest workers can engender similar emotions in their customers, but they are also better at their jobs. Satisfied employees stay longer, and employees with more experience make fewer errors, developing pattern recognition to solve unexpected problems. Most important, they can dedicate their full mindshare to tasks at hand, not to learning on the job. The best frontline employers have found ways to bring their workers to peak performance as fast as possible, developing employees to behave like seasoned workers within 90 days.
Losing a single frontline retail employee costs a retailer nearly $10,000 on average, with variations based on employee wage levels, the cost of covering the vacant shifts, the time it takes to hire another worker, and the time it takes for a new worker to reach peak performance. Multiplied over thousands of employees and several years, the drag on a retailer’s bottom line can be significant.
In our experience, most retailers have not quantified the impact potential, which can be comparable with the size of other major commercial or operational initiatives that are easier to quantify. Retail leaders, and their investors, will benefit from treating employee attrition issues with the same intensity as they do other customer-facing opportunities.
In our August 2022 article, we suggested that retail executives consider several actions, including understanding frontline talent pools and building distinctive employee value propositions. New data underscores the importance of those actions. Every retailer should have a clear answer to each of the following four questions, which address today’s frontline labor dynamics:
- What’s the value at stake? Frontline issues have typically been a focus for HR and operational field leadership, but they do not often get their fair share of investment and attention from the executive team. One of the root causes we have observed is a lack of well-developed business cases associated with addressing frontline attrition. The significant impact at stake, however, suggests that more resources should be allocated to frontline excellence. The benefits are manifold, from improved employee motivation to better CX and significant cost savings. Few other initiatives offer such a clear example of holistic impact. Every retailer should quantify the potential impact from investing in its front line, understand the sources of value, and ensure the management team treats frontline initiatives as a priority.
- Who are our priority talent pools—and what matters to them? Most retailers use internal surveys to get a sense of employee satisfaction and what their workers care about; few analyze the data with the same rigor they would apply to consumer research. By segmenting current and future employees using a wide range of data inputs (such as attitudes and personal goals), retailers can identify priority talent pools and create differentiated employee value propositions to attract workers who will thrive. The best employers also apply an equally data-based approach to screening frontline candidates and training new workers, reducing the number of new hires who quit within the first few months while ensuring no biases come into play.
- What is our plan to build strong frontline managers and a development culture? High-performing and engaged frontline managers have a downstream positive impact on the broader frontline organization. Retailers should start with a clear understanding of what makes a great frontline manager in their organizations and then design tailored career pathways and development programs that build a robust manager pipeline. The best frontline employers empower managers (and future managers) through a diverse set of on-the-job experiences and continuous field-and-forum learning focused on important skills. Recurring feedback and development conversations should supplement these programs. A differentiated manager development program will require investment, but the return can be high when done right.
- How will we reimagine frontline work to be more impactful for our employees and customers? Some frontline retail workers may leave their roles because they cannot see the impact of their tasks. Retail leaders can use new technology, such as generative AI, to simplify mundane frontline work and redirect employee energy to higher-level tasks. Digitized task management, automated ordering, production planning, micro-training, and a myriad of other recent innovations can improve the frontline experience. Scheduling is an evergreen problem and could be alleviated with new staffing solutions, such as flexible work platforms that pair qualified workers with retail managers who need to fill shifts. When deployed appropriately, these solutions can improve productivity and allow workers to shift their time to more meaningful work, which for many include engaging customers or leading their colleagues. Retailers should not underestimate the frontline capability building that such a shift would require.
Four years after the pandemic began, frontline work remains a challenge for the retail sector. Amid the prolonged high-attrition rates, there’s a clear opportunity for retailers to improve EX and performance. Not only will their employees benefit, but their customers will too.
