Retail workers slammed by job cuts, pushed into new roles as coronavirus shakes their industry

Key Points
  • Retailers and their employees are staring down challenges that could determine their longer-term fate — such as the spread of the coronavirus across the sunbelt and the risk of a second Covid-19 wave in the fall. 
  • The retail workforce has gotten smaller, but employees are also taking on new roles like fulfilling e-commerce orders or focusing on safety. 
  • But uncertainty remains for workers as retailers try to predict sales patterns and adjust their staffing budgets accordingly.
An empty parking lot is shown at a closed JC Penney store in Roseville, Mich., May 8, 2020.
Paul Sancya | AP

Ross Allen-McCabe worked for six years at J.C. Penney. Now, he's out of a job after the department store filed for bankruptcy and has so far let go hundreds at its headquarters in Plano, Texas. 

It is not the first time the 36-year-old has worked for a troubled retailer. Prior to his years at Penney, he was at Toys R Us, which also went through bankruptcy in 2017, after drowning in debt from its private-equity backers. 

Allen-McCabe said he's still optimistic about his prospects — even as the pandemic shakes up his industry, shifts employees' roles and leads to demands for new skills. Yet, he said he will approach his job search in retail differently now. 

"This hasn't left a bad taste in my mouth," he said. "However, I am now much more mindful of which retailers are pandemic-proof. ... Before, it was never a conversation: 'If the world shut down, what would that look like?" 

Even before the pandemic, retailers could quickly teeter toward profit or losses based on customers' appetite for shopping, their search for a deal or their fashion preferences because of the industry's thin margins. Customers were demanding expanded online offerings, delivered to their door or picked up in stores, that added costs. Some mall-based brands and department stores entered the global health crisis already hobbled, as they struggled to stay relevant. 

Read more: Retail workforce could face permanent decline as companies take blow from pandemic, lockdowns

When Covid-19 struck the U.S., it sharply heightened that unpredictability. Customers stripped shelves at essential retailers, such as Walmart and Kroger. But nonessential stores and shopping malls were shuttered for weeks during shelter-in-place orders. 

Now, retailers are staring down new challenges that could determine their longer-term fate — such as the spread of the coronavirus across the sunbelt, the risk of a second Covid-19 wave in the fall, and uncertainty around the back-to-school and holiday shopping seasons. That's shaking up the future for workers, too. 

"The problem with this environment is that you don't know what's coming," said Mark Mathews, vice president of research development and industry analysis at the trade group National Retail Federation. "The peak or trough in demand can be so immediate that it's difficult to plan for that and to have inventory in stock and to get people in the store to help you deliver some of that stuff to the consumer." 

Retailers face tough decisions: If they staff up too much, they could have to pay idle employees. Yet, if they hire too few, they could fall behind in filling orders and meeting customer demand. 

"It very quickly goes from a profitable business to an unprofitable business, if you're not careful," Mathews said. 

25,000 stores will close in 2020: CFRA retail analyst
25,000 stores will close in 2020: CFRA retail analyst

Growing, shrinking headcounts

Retail workers felt a near immediate impact as companies adjusted their staffing. 

Some, such as Walmart, Kroger and CVS Health, added to their workforce — but with many of the new employees hired as temporary employees. Walmart has hired more than 400,000 employees during the pandemic, according a company spokesperson. 

Home Depot and Lowe's moved forward with plans to hire thousands of seasonal employees during their typically busy spring season — and got a boost from Americans' spending on DIY projects during long stays at home. 

Best Buy, on the other hand, reduced its workforce as it changed how it operated. It initially switched to a curbside pickup-only model, then allowed customers to visit stores by appointment and later reopened its stores but capped capacity at 25%. The retailer furloughed about 51,000 employees, but has brought back about half of those employees. 

Others had to make cuts to survive. Bankrupt J.C. Penney has laid off 1,000 workers as it closes more than 150 stores for good during its restructuring proceedings. Macy's recently slashed 3,900 corporate jobs during a pandemic-induced restructuring, or about a quarter of its corporate workforce. Levi's earlier this month said it would cut about 15% of its global corporate workforce, impacting about 700 jobs. 

Online job openings reflect the uneven fallout. Jobs website Glassdoor had about 458,000 listed openings in the retail industry in the U.S. as of June 6, the company's latest report said. That's a drop of nearly 25% year-over-year. It was down 4% from the previous two weeks, but up 5.5% month-over-month. 

Job openings at supermarkets are down only about 10% year over year compared to the nearly 25% drop industry-wide, said Amanda Stansell, a senior economic research analyst for the company. 

Some roles are still in demand, including grocery managers and those related to e-commerce orders like warehouse managers and forklift operators. On the other hand, she said, there's a noticeable drop for roles with in-person interaction at nonessential retailers, such as for product demonstration and counter sales. 

Many analysts predict the workforce may stay smaller or shrink even after the pandemic

A worker delivers groceries to a customer's vehicle outside a Walmart Inc. store in Amsterdam, New York, on Friday, May 15, 2020.
Angus Mordant | Bloomberg via Getty Images

Shifting roles

Retailers are asking workers to shift roles, take on new tasks and help them "adapt to surges in some areas and lack of demand in other areas," said Mathews of the NRF. 

For example, he said, hourly workers may bounce between a retailer's different brick-and-mortar locations in their region rather than having a home store. They may pick orders for online fulfillment instead of working as the cashier. And corporate employees may have to step into other roles, such as store manager. 

And he said some employees have moved to positions oriented around safety — like reminding customers to wear a mask or keep social distance and taking colleagues' temperatures. Others now juggle new tasks, like fulfilling online orders between helping shoppers in the store. 

Mathews said he's optimistic retail workers can get hired back by the industry, even if their job description looks very different. 

"This pandemic is going to have a profound impact on the industry, but I don't think it's going to be as bad as a lot of people are saying," he said. "It's important when we look at these numbers and we look at the apocalyptic projections, that we recognize on the other side of the scale are businesses being created and jobs being created as well." 

But uncertainty remains for workers as retailers try to predict sales patterns and adjust their staffing budgets accordingly.

"Retailers all have a budget for what they can pay hourly workers," said Craig Rowley, a senior client partner at Korn Ferry and the head of its Retail practice. "If I have a store that sells $1 million a year ... I can only spend between 4% and 12% of those sales on payroll." 

As sales shrink and reach a "new normal," that percentage is going to shrink as well, Rowley said. For many companies, as they're looking to curtail expenses during the pandemic, people are the first thing to go. 

High hopes for back-to-school

In the months ahead, retailers may get a clearer outlook of the future — and so may their workers. 

Retailers have high hopes for the back-to-school season, which will indicate Americans' appetite for shopping. Spending is expected to hit a record high this season, as parents buy pricey tech purchases like laptops, tablets and headphones, according to an annual survey by the NRF. Parents of kids in elementary through high school said they plan to spend an average $789.49 per family, more than a previous record of $696.70, according to the survey. 

But like nearly everything during the pandemic, school could look very different. Some districts plan to teach virtually or limit the number of days when kids come to school, which could mean less of a need for new lunchboxes or backpacks. 

"There's a sense that people are willing to spend — but still a lot of uncertainty about how they're going to spend," Mathews said. 

During the pandemic, essential workers have taken on health risks as Covid-19 cases and hospitalizations have continued to rise. Some retail workers have died, including more than 278 of members of the United Food and Commercial Workers International Union, which represents workers in grocery stores, nursing homes and meatpacking plants. 

Yet the pandemic has fueled pay increases, bonuses and more sick leave for low-wage retail workers. Some of those have become permanent. Target, for example, sped along plans to raise its minimum wage to $15 as it phased out temporary pandemic-related increases. Best Buy will also give hourly employees a raise

"It's a reflection of retailer's recognition that a higher wage, more stable job that keeps people engaged results in better operational outcomes," said Kent Knudson, a partner in Bain & Company's retail practice. 

Allen-McCabe, the former J.C. Penney employee who is still looking for a job, remains upbeat, even as he admits this is the first time he's been out of work since he was a teenager. 

He said it was hard to not get a chance to say goodbye to his former colleagues, as the pandemic kept them out of the office. He's virtually spoken to them since, though. Many, like him, say they still hope to stay in retail. 

"My real passion is to be back in a store," he said. 

Bed Bath & Beyond CEO on earnings, store closures and the future outlook
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