No Retention Without Reward: It's Time to Revolutionize the Way Retail Workers Are Compensated
COVID-19 created a shakeup for retailers in all categories across the U.S., with brick-and-mortar operations undergoing some of the most significant operational changes they've ever faced. Sales associates have also felt the brunt of those changes; they've been asked to risk their health and press onward while the rest of us have enjoyed — if you could call it that — the safety of shopping online and working in our sweats.
As we were ordering our daily supply of sweetgreen, Shake Shack, and Drizzly, frontline workers were asked to increase their labor output while simultaneously risking their health for the same pay. Fifteen months later, the industry average of $13 an hour is no longer motivating enough for them to stick around.
And can you blame them? It was inevitable that something had to give. That's why our industry is grappling with "The Great Resignation" — i.e., the millions of employees who have quit their risky in-person jobs for the safety, flexibility and convenience of remote, work-from-home positions.
According to the Washington Post, the mass exodus of retail workers began in April last year, when nearly 649,000 said “no thanks” and handed in their notice. It's the largest number of employees to leave any industry since the Labor Department began tracking such data more than 20 years ago. In many ways, retailers aren't dealing with a labor shortage; they're dealing with a near absence of labor and an unavoidable signal that the retail worker model has to change.
Retail Workers Already Felt Marginalized Before the Pandemic
The marginalization of the hourly workforce has cultivated a perception that they're worth less than their white-collar counterparts. That's not a new sentiment. What is new is how quickly the pandemic brought these systemic issues to a head when it asked a group of workers that were already economically strained to go above and beyond. According to The Atlantic, one in seven essential workers lacks health insurance, and one in three lives in a household that makes less than $40,000 a year. Millions of frontline workers rely on food stamps to supplement their earnings. We depend on them for our daily convenience and making our lives easier, but we don't reward them.
Pandemic unemployment benefits gave retail workers an opportunity to reduce their exposure to the virus and avoid skyrocketing personal childcare costs when schools and public daycares closed their doors. As one of the founders of SparkPlug, a company whose mission was built around improving quality of life for frontline workers, I caution retailers not to buy into the narrative that unemployment checks were the only reason retail workers jumped ship.
Placing the onus on the availability of unemployment checks will keep the retail industry in a holding pattern. Retailers should acknowledge that the way we've been compensating hourly workers hasn't worked for some time. Once we do that, we can move forward, building a compensation program that's rewarding enough to motivate workers to come back and stick around.
Overhaul the Way We Think About Compensation
So, how do we do it? We start by recognizing the value of retail workers and how our businesses can't function without them.
Some retailers have already begun increasing hourly wages to entice retail workers back onto sales floors. Big brands are coughing up cash, too. Walgreens recently announced that it's raising its minimum wage to $15 an hour by November 2022, and CVS Health plans to do the same by July 2022 and cut its education requirements for new hires. lululemon will increase wages for its workers to either $15 or $17 an hour this year and expand its employee benefits program. Other retailers will naturally follow suit.
While wage increases are one approach to correcting the way we reward retail workers, it still doesn't compensate them in a way that's on par with their white-collar counterparts. Retail workers want to feel like they have a greater degree of control over their earning potential. They see employees in other fields being rewarded when their efforts translate into higher revenues for the companies they work for, and they understandably want the same opportunity.
Rewarding Quality of Work to Improve Quality of Life
Sales incentive programs and the "gamification" of workers aren't new concepts by any means. However, the logistics behind running incentive campaigns and games can be tedious, and as a result, most retailers don't run them often. While employees appreciate having the opportunity to win sales contests, they don't happen with enough frequency or reliability that they're perceived as part of their total compensation.
When my co-founder Andrew Duffy and I came up with the idea of developing a better employee reward delivery system, we knew that what we created had to be sustainable if it would benefit both employers and workers. It had to be intuitive enough that retailers would want to make it part of their daily sales strategy, not just use it for an occasional promotion. We also wanted to create a way for consumer brands to easily create campaigns and fund rewards so their retailer partners could incentivize workers with less financial investment.
We ultimately built SparkPlug for two reasons. The first: when retailers provide performance feedback and set transparent, formalized goals, they experience 31 percent lower employee turnover. And those that offer sales incentives see a 28 percent average boost in monthly revenue. The second: we wanted to help a historically underserved and undervalued group of workers feel that they were worthy and deserving of greater financial opportunities.
Rewarding frontline employees for their work ultimately drives revenues and levels up worker compensation packages. That, in turn, addresses the issue of labor acquisition and retention.
Even though the current labor shortage is incredibly challenging for retailers, it also can be a catalyst for beneficial change. Retailers that come out the other side of this hiring crisis with a new approach to worker compensation will be viewed as industry leaders. They'll also earn brand loyalty by demonstrating that their profits don't have to come at the expense of their workers' welfare. Retailers can and should be working in the best interests of their company and their sales floor staffers. They can significantly improve revenue and retention while making life better for the employees that keep their doors open.
Jake Levin is the COO and co-founder of SparkPlug, an incentive management platform for retailers.
Related story: Using Workforce Education to Attract and Keep Retail Employees in Today’s Labor Crisis
Jake Sky Levin is the COO and co-founder of SparkPlug, an incentive management platform for retailers.
His intuitive approach to consumer behavior has been vital in using data-driven strategies to identify emerging market opportunities. As a behavioral science and public policy graduate of Harvard, Jake worked for the National Democratic Institute and Investor Group Services, where he led diligence on over 30 investments in consumer products, software and retail technology. Jake has experience leading market researchers and consultants on more than 25 deals within the healthcare, agriculture, consumer goods, and fintech industries.
Jake is leading SparkPlug in its mission to maximize profits and create new income streams for retailers, consumer goods companies and restaurants while at the same time delivering a better quality of life for employees. You can connect with Jake on LinkedIn or visit www.sparkplug.app to learn more.