3 HR Challenges Facing the Retail Industry

May 23, 2024

Explore some of the key challenges of HR in retail and wholesale businesses and learn how to overcome them.

Much like a bustling store on Black Friday, the retail industry is fast-paced and dynamic. But for HR teams, there are just as many obstacles as opportunities.

On top of administrative tasks, HR is responsible for the entire employee lifecycle and the development of your organization’s culture. You act not just as a bridge between management and staff, but also as a leader of the workforce helping organizations thrive in competitive markets.

Are you up to the challenge? Let’s take a closer look at some common obstacles in retail and how to overcome them, so you can enhance your organization’s efficiency and maintain a motivated workforce. 

Key Takeaways

  • Retailers face a competitive labor market, high employee turnover, and communication barriers that can significantly impact operations and employee morale.
  • The retail industry's high turnover rates disrupt operations and increase costs, highlighting the need for engaging work environments.
  • Retailers can create an engaging and supportive work environment with competitive compensation, clear career advancement paths, and robust communication tools.

Three HR Challenges in the Retail Industry

Navigating the retail industry as an HR professional requires a keen understanding of its unique challenges. Retail businesses striving to stay competitive and relevant encounter several HR hurdles that can significantly impact operations and their workforce morale. Each challenge not only tests the limits of HR strategy but also presents an opportunity for transformative growth and innovation.

1. Competitive Labor Market

In today's retail sector, the competition to attract and retain top talent is intense for a few reasons: 

  • Organizational positioning: Retailers that don’t position themselves as premier employers will be less attractive to candidates who are looking for strong company culture, access to technology, and other benefits. 
  • Wages: The retail industry is known for having relatively low pay compared to other industries, which makes retention especially difficult in areas where the cost of living is high. Tight margins also mean organizations can’t pay more, and workers might leave for a better wage elsewhere. 
  • Limited opportunities for growth and development: Many jobs are entry-level positions with limited opportunities for advancement, so employees may seek out other possibilities for growth and development. 
  • Lack of benefits: A 2022 survey showed 49% of employers don’t offer health benefits, such as health insurance, and many employees are ineligible due to waiting periods or part time worker status.  

The rise of the gig economy has only heightened this challenge, putting stores under pressure to offer more than just competitive pay. They need to craft an appealing employer brand that showcases their values and resonates with the career aspirations of potential employees. Additionally, it’s worth offering standout benefits to make your company irresistible.

Although the “quit rate” in retail is 70% higher than in other sectors, research shows investing in employees helps retain the cream of the crop. From recruitment to retention, technology can enhance your processes and make your organization more attractive to current and future employees.

2. High Employee Turnover

Retail is notorious for its high turnover rates — climbing to 65% in recent years — that can disrupt operations and inflate hiring and training costs. The impact of high turnover is profound, leading to a decrease in employee morale and, sometimes, a decline in service quality.  

 The reasons behind this trend range from low job satisfaction and inadequate pay to unpredictable work schedules. For today’s employees, work is no longer just a punch-in and-out commitment. They see their job as an extension of themself and seek employment with organizations with a strong company culture.  

This benefits your organization in the long run. Research shows employees who are more aligned to their company’s mission feel passionate about what they do and have positive emotions about the company culture. They are also more productive and engaged — meaning higher profitability for your store. 

Retailers must address these issues by creating more engaging and rewarding work environments, offering competitive compensation and clear paths for career advancement to retain their best employees.

Learn More: What is Employee Turnover? A Comprehensive Guide

3. Lack of Company-Wide Communication

In the retail and wholesale industry, keeping everyone on the same page is complicated — employees work different shifts and often at different locations. Many of them don’t have access to computers or company email addresses, and they’re on the floor during every shift. 

While communication is a key factor in an organization’s growth and success, it comes with challenges: 

  • Productivity: Employees who aren’t communicating with each other and management can stall everyone’s productivity.  
  • Training and development: Providing career development opportunities is difficult when employees work inconsistent schedules.  
  • Employee engagement: Communication barriers can be a hurdle for employees to feel fully engaged in the workplace and to build strong relationships with their coworkers. 

Without strong communication channels, employees at different levels and locations may feel disconnected from the company's core objectives and values, which can affect their performance and engagement. According to McKinsey research, employees who feel included in workplace communication are nearly five times more likely to report increased productivity.

Implementing robust communication tools and strategies that ensure all staff members are informed, involved, and aligned with the company’s goals is crucial for fully engaging your employees, no matter when and where they work. Overlooking this can lead to inconsistencies in customer experience and inefficiencies in operation, undermining the overall success of the business.

How to Overcome HR Challenges in Retail

Overcoming the challenges of a competitive labor market, high employee turnover, and inadequate communication in the retail industry hinges on a robust investment in employee engagement and development.

By fostering a supportive work environment that values continuous learning, career growth, and open communication, retailers can enhance employee satisfaction and loyalty. Initiatives like offering competitive benefits, flexible scheduling, and regular feedback can help attract and retain top talent. Additionally, implementing advanced communication tools and strategies ensures that every team member feels connected and valued, regardless of their role or location. 

Tackle Today’s Challenges for a Stronger Tomorrow

In the retail industry, there never seems to be enough time in the day to manage challenges like tight margins and high turnover.  Learn how to leverage modern technology to overcome five of your HR challenges.

Eliminate Obstacles with HR and Payroll for Retail

Paylocity is the leading HR and payroll platform for the retail industry because it delivers modern features for simplified behind-the-scenes processes and top-tier employee experiences.  

From payroll to document management and time tracking to scheduling, automation saves you time and plenty of headaches. And Paylocity partners with you every step of the way, with HR consulting and tax preparation services available.  Here are just some of the additional tools we offer:

Request a demo to see how Paylocity helps you run your store smoothly, no matter the season.


HR Tools Built With Employees in Mind

Recruit and retain talent by shaping an environment that makes employees feel valued and engaged. With HR tools built with employees in mind, you can equip your employees to be more self-sufficient and gain valuable insights into what you can automate and where you can strategically focus your resources. You can deliver the experience your employees need to find meaning in their work, and you'll continue improving efficiency.

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