The Spirit of Christmas Past

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Most retail observers expect this year\’s holiday season to hold its own in terms of sales, but unless they carefully manage their human and technological resources, not all retailers, on- or offline, will be positioned to capitalize on the season\’s lower unemployment rates and increased consumer confidence.

According to A.T. Kearney\’s 2018 Holiday Shopping Survey, consumers, to borrow a line from Dickens, remember the Spirit of Christmas Past all too well and those memories are haunting some operators in Christmas Present 2018.

The Survey, which polled 1,000 shoppers about how their 2017 experiences would influence their spending this year, found over 60 percent of respondents willing to change where they shop based on negative experiences last year.

Respondents reported enduring a variety of unsatisfactory in-store shopping experiences last year. Eighty-four percent said they experienced long holiday lines, 67 percent complained about out-of-stocks, and 57 percent reported receiving poor service. While all these complaints are causes for concern, long lines and out-of-stock issues were cited as the top reasons for switching behavior.

Shoppers have similar negative experiences with brick-and-mortar and digital retailers, although they respond to them differently.

Twenty-three percent of those surveyed indicated that this year they will be shifting their primary buying to online and/or mobile as a result of bad experiences, while only 14 percent said they would shift their spending to primarily in-store.

Online shoppers reported similar complaints when it comes to out-of-stocks, the largest problem respondents identified in terms of their 2017 holiday e-commerce experience. But, that said, in-store complaints were more common than online for every major retail format, and shoppers said they were 65 percent more likely to report issues in-store compared to online.

A shortage of holiday labor is at the root of many of these problems – not good news for retailers in an increasingly tight hiring market.

How Deep Is the Hole?

This holiday season retailers are looking to increase their holiday hires by about 10 percent over 2017 levels.

What does that 10 percent look like in real numbers? Well, according to published reports, Target hopes to add about 120,000 seasonal workers. Kohl\’s needs roughly 90,000 additional workers. Macy\’s is eyeing putting 80,000 seasonal workers on their payroll. And, JCPenney is looking for 18,000. Filling those jobs is going to be tough. Korn Ferry estimates there were 757,000 retail openings this July, 100,000 more than in the same period last year.

A tight labor market, high levels of job creation, and low levels of unemployment are forcing most retailers to look to one or more of three strategic approaches:

  1. Increase compensation for new and existing workers;
  2. Change their traditional approach to labor scheduling;
  3. And/or look for technologies that can mitigate the conditions survey respondents said would cause them to switch how and where they buy.

Despite wage increases like Amazon\’s $15 an hour minimum and bonus programs such as Macy\’s extending a seasonal worker bonus program similar to what full time staffers are eligible for and Target\’s plan to set aside approximately $2 million for employee raffles and discounts, retailers are still challenged to find workers.

Some retailers are ahead of the game, like Kohl\’s and JCPenney, which began hiring seasonal workers as early as June this year. Other retailers like Walmart are again offering year-round employees extra hours during the holiday season in lieu of seasonal hires.

Retailers who haven\’t taken action to address the employee issue need to face some tough truths. Attrition is likely to be a problem as competing retailers incentivize hires. Workers added at the last minute are often lower skilled, lacking both sufficient training and experience, placing additional burdens on customer service and supervisory staffs.

Technology to the Rescue?

Of course, there are non-labor-based solutions for some of these issues. Automation and supply chain efficiencies can help offset the impact of labor shortages. For example, retailers might consider making self-checkouts available or increasing the number of self-checkouts in operation. Over half of respondents reported they are likely to use self-checkout terminals this holiday season.

Digital Sins Go Equally Unforgiven

Customers are as unforgiving online as they are in-store, so living up to service promises has become retail table stakes, regardless of channel. Shoppers will be less tolerant of distribution glitches this year, especially in the wake of the number of the delayed or late fulfillment of online orders in 2017. Any residual novelty associated with online ordering has worn off, and consumer expectations around delivery have increased. As a result, customers are migrating toward online retailers that promise shorter delivery dates and live up to their promise. Retailers have responded, as evidenced by the significant investment they have made in \”buy online, pick-up in-store\” capabilities that give them the ability to leverage the efficiency of their store-based network even as increasing online demand strains historical distribution capacities.

The Bottom Line

The message to retailers is clear: whether you are looking for human solutions or designing workarounds to a trained labor shortage, consumers are going to be more impatient and less forgiving than they were in past years. And in a year when those shoppers have more money in their wallets and are more open to spending it, not giving them what they want could be an expensive mistake.



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