Industry employment is shrinking because of cost-cutting, consolidation, technology advances and the rise of Internet shopping. Those lower on the pay scale, particularly selling-floor associates and back-office workers, are most affected.
Total seasonally adjusted retail employment last month was 15.2 million, the Labor Department said on Friday. That is a drop of 9,200 from November and a decline of 57,800 compared with December 2005.
“It’s not that we’re not shopping,” said David Wyss, chief economist at Standard & Poor’s. “We’re doing plenty of it, but we’re doing more of it online, we’re doing more of it at the big-box stores and they just don’t have the number of employees per shopper that the traditional department stores do.”
Trying to remain competitive in an increasingly cutthroat market, department stores have consolidated, such as Federated’s acquisition of May. The trend makes for some tough sledding throughout the retail workforce — from the corner office to the stockroom. Department stores lost 38,700 jobs during the last year.
“You have a lot…going on and, when two stores merge, you only end up with one [chief executive officer] and one [chief financial officer] and one accounting department,” Wyss said. “It’s not a growth area anymore.”
The news on fashion employment is a bit brighter. Apparel and accessories firms increased payrolls by 12,600 in the past year.
Nonetheless, stores have to work to find qualified employees who fit their needs.
“If you’re competing for new graduates from the textile schools around the country to be your fashion buyers, they don’t want to work nights and weekends,” said James F. Smith, director of the Center for Business Forecasting at the University of North Carolina at Chapel Hill. “You’re going to have to figure out how to be competitive to get the people that you want.”
The unemployment rate for people 25 years of age and older with at least a bachelor’s degree is just 1.9 percent. “That spells trouble for retailers,” Smith said.
Carl Steidtmann, chief economist at Deloitte Research, said retail employment declined slightly in 2006, even though it was a good year for the industry overall.
“Retailers are just able to manage their businesses with fewer people,” he said. “I would expect [retail employment in 2007] to be flat to down. Productivity gains are coming from better supply chain management and a reduction in emphasis on customer service. Both point to very small declines in employment. We expect sales growth to be weaker in 2007. That translates to more pressure to control costs.”
He added that the technology revolution and consolidation continues to squeeze jobs from the industry. However, retailers that thrive on innovation, particularly in the consumer electronics and organics arenas, are growing the most and probably adding to the ranks, Steidtmann said.
The largest U.S. employer, Wal-Mart, with 1.3 million workers, is slowing its domestic expansion this year and being more selective about building stores. Wal-Mart’s saturation strategy — opening new stores in proximity to existing units — is no longer a priority. At a meeting for analysts in October, the company said it planned to open 305 to 330 new stores this year. Wal-Mart aims to open 21 stores this month alone, employing more than 6,800 associates. A company spokesman said the number of workers in a store varies depending on the format and location.
Wal-Mart this year also will open two regional distribution centers and two grocery distribution centers, each with several hundred employees, the spokesman said.
Limited Brands expects its workforce to grow this year, said Jane Ramsey, executive vice president of human resources. The corporation has more than 100,000 employees, and is significantly expanding Victoria’s Secret Stores.
“We will definitely need more store associates and with new concepts in the business that we are developing, we will need more home-office-type staff,” Ramsey said. “Our whole strategic framework depends on having the talent in place to grow the Victoria’s Secret business, including Pink.”
Limited Brands started recruiting at about 15 colleges and graduate schools last fall for a training program called Retail Residency, launching in summer 2007, Ramsey said. It gives employees an overview of Limited Brands and its strategic framework, product life cycle and experience in stores. The company also is expanding its merchant-in-training and planner-in-training programs.
Hal Reiter, president and ceo of Herbert Mines Associates executive search firm, stressed that it’s important that people running retail companies have retail experience under their belt. Two nonretailers were pushed out in recent weeks from leadership positions at major companies: Robert Nardelli, the ceo of The Home Depot, and Catherine West, the chief operating officer at J.C. Penney.
“There is a general consensus that it is very difficult to have a transfusion of retail into your blood midcareer,” Reiter said. “The only reason why senior retail executives become successful is that they started in retail when they were in their 20s. It’s becoming clear that you can’t learn this job as a second career.”
With retailers choosing nonretailers to run the company and finding it doesn’t always work, “there are opportunities for young people to get into this business and achieve success in a shorter period than before,” he said.
“It’s a mixed bag” of opportunity, said Robert Kerson of the executive search Kerson Partners Ltd. Private equity firms will often look to recover their investments in retail firms by taking costs out of them, slicing payroll and reducing the corporate office staff in areas such as finance, h.r. and planning, particularly when they have opportunities to combine retail operations, Kerson said.
“They’re not only cutting payroll, but the rate of new hires drops off dramatically,” he said. “There is a huge amount of attrition that goes on in these merged companies. Look at Federated-May with all its attrition and very little hire back.”
At the general merchandise manager to ceo level, “I would expect some real major changes this year,” particularly at companies reporting weakened earnings, meaning vacancies will be created, he added.
Terre Simpson, principal of Terre Simpson Associates, an executive search firm, said, “Specialty shoe chains and accessories chains are segments that are growing. A lot of stores are coming from overseas, but they’re not opening at a major pace. There’s a lot of financial and retail conservatism based on how the economy is going. The cumulative opinion is conservatism.”
Although hiring levels in 2007 are likely to remain consistent with the past few years, look for some activity on the international front, said Kirk Palmer, principal of Kirk Palmer Associates, an executive search firm. “India is exploding. Some retailers are looking for American talent to bring to India to open stores.”
Retailers have stepped up recruiting at the University of Arizona’s Terry J. Lundgren Center for Retailing — named for Federated’s ceo, an Arizona alumnus — but they’re more selective than ever, said Melinda Burke, the center’s director. “Retailers are very aggressively interviewing students and very cautiously making offers,” she said. “They’re trying to reduce their turnover and retain their recruits.”
Lundgren’s Macy’s chain is one of the biggest recruiters at Arizona, along with J.C. Penney, Sears Holdings, Wal-Mart and Walgreens, Burke said. “There’s more variety in the kinds of positions these companies are recruiting for,” she added. “Companies have positions across the supply chain — in accounting, finance and management. We’re seeing the traditional buyer jobs split into three different roles, so you have a buyer, an analyst and a planner. The buying responsibilities are greater with higher volumes and they’re taking a team approach.”
Retailers are recognizing the need for “a deep bench of talent they can develop,” Burke said. “Otherwise, they’re going to be in a bind in 10 years when all of their managers are retiring.”
J.C. Penney, which was absent from the Arizona campus for about four years, is back in a big way, Burke said, noting that the retailer is hiring for positions in purchasing, distribution centers and the buying office. Penney’s is opening 50 stores annually from 2007 to 2009. A spokesman said most of the units will be the off-mall format with about 100,000 square feet and 125 to 150 employees. “There will be a lot of those are part-time store positions,” he said. “There’s some management staff and stock teams.” He said the openings won’t greatly impact the corporate workforce because buying, planning and allocation is centralized.
Steve & Barry’s University Sportswear, which in November sold a minority stake to buyout and private equity firm TA Associates in anticipation of a possible initial public offering, is expanding. This year, the company will open 100 stores, ranging from 50,000 to 100,000 square feet. Each store employs about 100 people, said Gary Sugarman, chief operating officer. “We recruit for the field and our corporate office. About one-third of our resources are allocated to recruiting for the corporate office and two-thirds for the field. We’re aggressively engaged in hiring for both.”
The company’s training program brings recruits such as store managers to New York where they take “responsibility” workshops and get immersed in the Steve & Barry’s culture.
“We’ve brought more than 250 graduates from top schools such as Harvard, Columbia, the University of Pennsylvania, Cornell and Duke to our corporate office in the past couple years,” Sugarman said. “A few years back it was considerably more difficult to get people thinking of retail as a viable career choice. Now there’s momentum on campuses.”
— With contributions from Evan Clark, Washington