Wal-Mart wants more staff on the floor and fewer in the back office.
As the world’s largest retailer continues its reinvention push to adapt to the fast-changing landscape and the ongoing threat from Amazon, the company said Thursday that it would eliminate 7,000 back-office roles at its U.S. stores in the next few months.
At a time when customers are shopping less in physical stores, the move is aimed at simplifying store procedures and modernizing back office functions by improving invoicing accuracy — and freeing up associates, at least in theory to spend more time interacting with customers on the sales floor or gathering groceries for curbside pickup of online orders. The grocery initiative began as a pilot in June at 500 Wal-Marts and is now set to roll out to all 4,600 U.S. stores.
The back office employees engaged in inventory and accounting functions are among the highest paid workers at Wal-Mart stores. The retailer said its goal is to find roles for them in their individual units.
“Depending upon the role the associate takes, they could see a pay increase if they move into an assistant manager training program or they could move into another role with the same pay,” a Wal-Mart spokeswoman said. “Some may end up in roles where they may have a slight pay decrease. It remains to be seen as we roll this out.”
After years of criticism, Wal-Mart in 2014 revealed that it would increase U.S. associate wages to $10 an hour, committing $2.7 billion over two years. The news was unpopular on Wall Street, and the increase has impacted Wal-Mart’s earnings over the last few quarters. But Doug McMillon, president and chief executive officer of Wal-Mart Stores Inc., in May attributed the retailer’s surprise comp-store sales increase of 1 percent in the first quarter in part to “investments in training and associate education, wages and store structure…giving our associates more time on the sales floor to serve customers.” Analysts were expecting a gain of 0.5 percent for the first quarter ended April 30.
Wal-Mart’s comp-store sales increase in the first quarter, and its 1.6 percent gain in the most recent second quarter, substantially outpaced its rival Target, which reported comps of negative 1.1 percent, and the Bentonville, Ark.-based retail also continues to outperform its competitors in food retailing.
Even with the retailer’s push to increase wages, Wal-Mart remains a lightning rod for criticism and the Thursday news stirred an immediate backlash.
“This Labor Day, Wal-Mart has decided to rollback jobs instead of their prices,” said Jess Levin, communications director for Make Change at Wal-Mart, a group supported by the United Food and Commercial Workers International union. “Clearly, this is how Wal-Mart intends to pay for that investment [in wages]: by firing associates and cutting jobs.”
Craig Johnson, president of Customer Growth Partners, said Wal-Mart’s role eliminations make good management sense. “Even if a retailer is strong and well run, they trim the workforce from time to time and trim the store fleet from time to time. Some people are lower performing and some stores aren’t high-performing. It makes a ton of sense in [this] retail environment. Things are getting more centralized and automated.”
Johnson noted that Wal-Mart units are less productive than they were a few years ago, not only in terms of sales per square foot but operating income per square foot. “This is a very troubling trend that calls for urgent action,” he said, noting that Wal-Mart’s top ratio has fallen to $25.40 in 2016 from $34.57 in 2013. The measure also reflects a retailer’s online sales, which have been lagging at Wal-Mart — hence its $3 billion acquisition of Jet.com in July.
Wal-Mart is creating a centralized location for invoicing in North Carolina and will hire 1,000 associates to staff that office. Technology is playing a big part in the initiative. “We’re updating our procedures,” the spokeswoman said. “We are using a cash recycler machine. We think of it as modernizing the accounting office. It requires less handling of money and allows associates to more quickly open and close out cash registers.
“We’re pleased with the seamless nature of how the associates rolled into those new positions in the pilot,” the spokeswoman said, adding that Wal-Mart is trying to orient its stores to “how customers are shopping us today to support our online grocery or pick-up in store business. The fact that we anticipate that associates impacted by this will move into new roles is an important nuance.”
The pilot and rollout are a key initiative of Wal-Mart USA president Greg Foran, whose rallying cry has been “cleaner, friendlier and faster stores.” For example, stores now have hosts to welcome and guide shoppers and self-checkout hosts to ensure lines move quickly.
“We brought back a number of department manager roles in the past year-plus,” the spokeswoman said. “We’ve made changes in how we’re managing inventory with ‘topstock,’ where we have associates putting extra inventory on that very top shelf so they don’t have to go to the back room. This is all about being a retailer that reflects how customers are shopping today in every aspect of our business.”
Wal-Mart did not reveal the financial impact of the latest job eliminations.”Whether this is an outright reduction in work force or elimination of positions, I would expect an event like this to trigger some sort of a hit on the expense line,” Johnson said. “You’d think they would record a charge of some sort for this many people.”
Still, in Wal-Mart’s universe 7,000 is only about 5 percent of the retailer’s total two million employees worldwide and about one-and-a-half positions per store in the U.S.