NEW YORK — The pressure on retailers just keeps building.
This story first appeared in the April 28, 2008 issue of WWD. Subscribe Today.
The downturn in the economy, rising health care costs and high gas prices are squeezing retailers and naturally leaving their employees feeling uncertain about their futures. As contracts expire and unions and retailers sit across the negotiating table, experts said it’s becoming increasingly difficult to strike deals as both sides work aggressively to protect their interests.
Bloomingdale’s management and representatives of Local 3 of the Retail, Wholesale and Department Store Union, which represents the 59th Street flagship, were locked in talks over the weekend about a new contract. The previous one expired March 1, but talks were extended until April 30. The executive board of RWDSU’s Local 3 said it received authorization from its members to call for a strike at the flagship if a new agreement isn’t reached by 6 p.m. Wednesday.
A Bloomingdale’s spokesman Sunday said that both sides met face-to-face for most of the day Saturday. They were scheduled to speak by phone on Sunday. He said the talks were progressing well.
The two sides are scheduled to meet again today, when Bloomingdale’s “will begin to take the first steps of management’s plan to keep the store running,” the spokesman said, adding that the flagship would be staffed by buyers, merchandisers and others if necessary. While the talks resume, “we’re still talking about contingency plans,” he noted.
A strike would be the first at the flagship in 43 years and, depending on the length of any labor action, could cost the retailer millions.
“Right now, the main concern is compensation,” said David Mertz, RWDSU’s chief of staff, noting Bloomingdale’s doesn’t want to give workers guaranteed wages. Rather, the retailer has put forth a proposal for merit increases.
“There are concerns that that kind of system might be ripe for favoritism,” Mertz said. “The union is looking for a wage increase as it has done in the past. With merit raises, employees would be reviewed by a manager who would have a discussion about whether to award higher compensation. There are a lot of concerns about how that would play out.”
While many of Bloomingdale’s sales associates work on commission, Stuart Applebaum, president of RWDSU, noted that non-sales employees would be subjected to the merit plan, and that it would also apply to non-commission sales associates. Asked if Bloomingdale’s proposed cutting work hours, Applebaum declined to comment directly, saying only, “It’s difficult for people if their hours are reduced because they have to be able to earn enough to support their families.”
The union and retailer are also trying to iron out issues about health care. “The union objects to changes Bloomingdale’s wants to make in the health plan, which it said will shift more of the costs to employees,” Mertz said. “The health plan has been in place for quite a long time. What the company is trying to do is make changes to that plan that would have a negative impact on affordability. Our concern is that the health care provided is affordable and offers choices people want and need.”
Citing Bloomingdale’s “very profitable year last year on 59th Street,” Applebaum said, “What’s amazing about Bloomingdale’s is that it seems to operate in reverse of how the economy is doing. Almost 30 percent of sales [at the flagship] come from tourists, many of whom are foreign tourists who find it advantageous to shop here with the dollar’s decline. Bloomingdale’s on 59th Street’s sales figures improved rather than fell as the economy declined.
“Retail has become the job of entry for workers throughout New York,” he said. “Bloomingdale’s is an icon and sets the trend for other retailers in the city.”
A Bloomingdale’s spokesman on Friday said, “We’ve had a long history of resolving difficult issues with the union. The tenor of the talks has been mutually respectful.”
Strike threats from union members are not uncommon during contract negotiations. Members of the RWDSU, UFCW Local 1-S rallied in front of Macy’s Herald Square flagship in February 2006 in support of a possible strike if a contract was not agreed upon by March 1. Negotiations were ultimately successful and there was no strike. Local 3 threatened to strike at Bloomingdale’s in 1996, but a strike was averted at the 11th hour and a contract agreement was reached.
Eugene Eisner, president of Eisner & Associates and an attorney for RWDSU, said Ida Torres, president of Local 3, who has been at the bargaining table, characterized the negotiations as “difficult.”
“She’s meeting with her members regularly in case they have to get ready for a strike,” Eisner said. “She’s mobilizing her members.”
Ralph Berger, a mediator and arbitrator who has been involved in negotiations between Macy’s and RWDSU, said economic conditions are making negotiations more challenging. “Obviously, it hurts everybody,” he said. “The downturn in the economy makes all collective bargaining negotiations more difficult and increases the pressure on both sides.”
“It’s my impression that, in this kind of economic environment, unions are worried about job security and retention more than anything,” observed retail analyst Walter Loeb. “Probably, they would like to maintain present working arrangements rather than shift to [pay increases based on] productivity. It’s my impression, too, that retailers are unwilling to extend themselves at this point because they are trying to maintain some profitability for their stores.”
Besides Bloomingdale’s and Macy’s, RWDSU has organized employees at Syms, Modell’s and parts of Saks Fifth Avenue, including support areas and the shoe department. In addition, Hennes & Mauritz, with more than 1,000 employees in Manhattan, recognized the union this year.
Any increase in wages or health care costs would only add to already spiraling costs for major retailers in the current economic environment. Skyrocketing oil prices are raising transportation, heating and air-conditioning bills, while the falling dollar against the euro makes it more expensive for buyers to travel overseas as well as to buy European products for their stores. All this comes in the midst of the downturn in the economy, which many observers speculate might not improve until the middle of 2009.