How Do Retailers Solve the Labor Shortage Crisis?

The events of the last few years — Brexit, the pandemic, The Great Resignation, a cost-of-living crisis — have caused evolving challenges that continue to ripple through the retail industry. One of the biggest causes for concern for businesses today is a mass shortage of workers as people switch to remote or at-home working, decide to retrain in other sectors, or take early retirement.

From packing orders to customer service, a strong workforce has historically been fundamental to a retailer’s success when orders surge in peak season. The trouble is, securing a strong workforce is a major challenge for many retailers right now — regardless of which sector they operate in. In many areas — especially rural ones — there's a worrying shortage of workers. That has left a gaping hole in the labor market, and filling roles that require in-person attendance continues to be a major problem.

Latest market figures revealed that for the first time since records began, there are more job vacancies in the U.K. than people applying for them. In the U.S., job vacancies reached an all-time high in July 2022. Yet, despite the absence of a readily available workforce, retailers are still trying to hire from a labor pool that doesn’t exist. That will cause challenges at the best of times — but during the holidays, with increased demand, employees taking time off, and ongoing supply chain issues, it's a situation that could cause major headaches for brands.

Unless this ongoing shortage is treated as a business emergency by retailers, it’s only a matter of time before the situation wreaks havoc for them.

Minding the Gap

A shortage of labor was one of the big challenges for nearly one in five (19 percent) online retailers last festive season. It’s expected to be a major challenge this year, too. And while demand is hard to forecast, major events like the World Cup bring with it the potential to kick-start sales over the holiday period.

Retailers are, understandably, scrambling for a solution. Brightpearl’s research reveals that almost four in 10 (38 percent) online brands in the U.K., and three in 10 (31 percent) in the U.S., sought to increase labor to manage online demand during the last holiday season.

On paper, that seems like a sensible step. However, if the extra workers simply don’t exist, it’s a tactic that’s doomed to failure. Businesses can’t rely on a shrinking labor pool to manage increased demand this holiday season. Believing they can is a disaster waiting to happen.

The question now is how to uphold the expectations of customers as pressure and demand fluctuates, while reducing overhead as much as possible.

Automation Should Top Holiday Wish Lists

In order to survive and thrive during this uniquely challenging holiday season, vendors must process online orders more quickly, more accurately, and in a manner which safeguards both their employees and the end user. If they don’t, they risk errors and delays that will likely result in shoppers missing out on vital holiday deliveries, further damaging an already tenuous relationship between seller and consumer.

In this climate, retailers and their warehouses need to maintain flexibility and scalability and decrease their reliance on temporary or unreliable labor pools. They need different solutions that remove the need for humans to actively manage the order-to-fulfilment process.

One solution lies in automating retail workflows, from order processing to inventory and shipping, negating the need for a human presence in large parts of the warehouse. Not only does this remove the risk of human error from these repetitive manual tasks, it ensures that orders can be picked and packed efficiently and helps to maintain the productivity of the operation.

Despite capacity being a major challenge, automation is still being ignored as an investment priority, even though these technologies are essential for managing increased holiday demand. Only 10 percent of online retailers plan to invest in automation to support the business throughout the holiday season.

Serve at Greater Capacity

At Christmas, customers want their orders fast — and need brands to honor delivery estimates. Fully automating sales orders, stock updates and distribution decisions, so items can get out of the door quickly, should be a no brainer. However, too many retailers continue to stick to tried-and-true tactics — e.g., spreadsheets and guesswork, seeking to employ temporary staff over the holidays — even if these solutions are no longer workable.

Manual processing takes time, hours spent on meticulous spreadsheet calculations and data entry. Man-powered picking and packing, stock-taking and preparing for delivery are all similarly repetitive tasks that run a high risk of human error.

When combined with operating at less capacity over peak season it's only going to slow things down further — meaning time that could be spent on seasonal priorities such as promotional activity and a personalized level of customer service is instead directed to the day-to-day operations of the business.

Safeguarding Experience is Key to Seasonal Success

For the majority of brands in 2021, the holiday season turned sour as they struggled to meet the demands of increased orders. Fifty-five percent of fashion brands in our research admitted they "simply couldn’t cope with online demand." This led to a quarter of firms delaying orders as a result — hardly ideal for a brand’s reputation at such a highly charged, stressful time of the year. The impact on shoppers was significant, with a third on both sides of the Atlantic saying they were let down by an online order during the holiday season.

When we polled online retailers to understand how they planned to address these challenges for the forthcoming holiday period, the majority said they were planning to hire seasonal staff, extend delivery time lines, increase prices, or eliminate promotions and discounts. As we’ve discussed, hiring staff may be a nonstarter, and these other strategies are likely to reduce demand — but may leave a bad taste in the mouth of shoppers and result in missed sales opportunities during the most important quarter of the year. Not the most sensible approach.

Capacity challenges are an impending threat for any business this holiday season, and there’s a real risk that shoppers might not get their items when they expect them.

One thing online businesses must do is try to safeguard the experience customers receive so they keep coming back in the New Year. Brands must ensure families get holiday gifts on time, as expected. This means retailers need to find solutions to ensure they can process e-commerce orders not only more quickly, but more safely too. By strategically implementing automation into retail operations, supply chains can work continuously without having to delay deliveries and staying true to customer expectations.

Final Thoughts

Recent events have shone a spotlight on existing models and approaches that need to change — and quickly. Businesses need to be aware of their requirement to constantly evolve and use new available technologies to de-risk the operation. A capacity crisis is looming, but if merchants act quickly then they can reduce the strain so that nobody is disappointed on Christmas morning.

Mark Hook is the global communications director at Brightpearl, a retail-tailored digital operations platform built for omnichannel merchants.