Retail's turnover a plus for economy but challenge for stores

With seasonal retail jobs expected to hit levels not seen since 1999, the slew of recent holiday hiring announcements is an early indication the industry is feeling markedly better about the Christmas season than in 2013. But the good news isn't just restricted to retail.

After reaching 100 percent in 2005—then subsequently dropping to 51 percent following the recession in 2011—median turnover rates for part-time retail workers jumped back up to 74.9 percent in 2013, according to Hay Group, a management consulting firm.

What's more, data from the Bureau of Labor Statistics show levels at which people quit continue to be on the rise for the industry, with a preliminary rate of 2.9 percent for July, compared with 2.3 percent a year earlier.

Employee Justin Jones calls for another TV as the big screen TV's sell fast at a Target store in Washington, Nov. 28, 2013.
Michael S. Williamson | The Washington Post | Getty Images

Voluntary turnover among retail workers is typically viewed as a good sign for the economy because it means employees who may be unhappy in their current roles are confident they can find another position elsewhere.

"Everything we see indicates the economy is slowly improving," said Craig Rowley, vice president at Hay Group.

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Despite its positive implications for the larger economy, retail churn is one of the biggest challenges the industry faces from an operational standpoint. The more frequently sales staff members exit a retailer, the bigger the need to find new people to fill their shoes and ramp up training.

Tom Stockham, CEO of the Experticity consulting firm, said one of the best approaches for retailers to fill these vacancies—and retain the employees they recruited—is to identify people who are already passionate about or familiar with the product or category they're selling.

In a recent study his firm conducted in conjunction with University of Pennsylvania professor Marshall Fisher, Experticity found that sales by knowledgeable, engaged store associates brought in 69 percent more money on average than sales by those who weren't.

Case for minimum wage hike
Case for minimum wage hike

In turn, retailers that treat their employees as more than just an expense on the balance sheet tend to have higher retention rates, higher sales per square foot and lower store return rates, Stockham said.

"Hiring the right people is going to make retail much more productive," he said.

Some firms are upping their pay as a way to get an edge over competitors. Gap, for example, earlier this year raised its hourly pay for U.S. workers to $9, which it will again boost to $10 in June. Sales workers in the clothing and accessories stores receive a median hourly wage of $9.24 in May 2012, according to the Bureau of Labor Statistics.

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Still, recruiting workers also poses a bigger challenge as the unemployment rate edges closer to 6 percent, causing the candidate pool to dwindle.

"We are hearing from our clients that it's harder to fill positions. It's taking them longer [and] they don't have as many applicants as they did a year ago," he said. "There are more job alternatives out there for the potential applicant."

Transitioning from part-time to full-time

In addition to Challenger, Gray & Christmas' forecast last week that predicted retailers' seasonal hiring levels could top 800,000 for the first time since the dotcom boom, Hay Group found that 24 percent of companies plan to hire more full-time staff in 2014, compared with 13 percent the previous year.

Hay's Rowley said one of the biggest benefits of part-time seasonal hiring is that it acts as a sort of auditioning process, helping retailers identify workers who enjoy and are effective at their jobs.

"Extending a permanent status after the first of the year is an easy thing to do," he said.

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Experticity's Stockham, on the other hand, said that often the rush to hire, train and monitor these seasonal employees makes this difficult to do. Wal-Mart, Target and Kohl's, for example, all plan to add 60,000 or more workers this holiday.

"Unfortunately the reality is sometimes that retailers are just so pressed to staff to the right level that they start taking shortcuts on who they hire," Stockham said.

Correction: An earlier version of this story misstated the median 2013 turnover figure for part-time retail workers.