Six Ways the Retail Industry Is Preparing for Consumer Demand This Holiday Season

Keith Jelinek and Elizabeth Arnold

Amid a labor shortage and lagging global supply chain, companies will have to rethink their retail strategy.

For retailers across the country, a unique confluence of events has formed for the 2021 holiday shopping season.

The global supply chain remains in disarray, and the Great Resignation has retailers (indeed, most employers) struggling to fully staff up. Consumers, meanwhile, appear bound and determined to shop both online and, critically, in person despite lingering COVID-19 concerns.

Put it all together, and retailers must be ready for nearly anything in the coming weeks.

That consumers aren’t shying away was clear in BRG Retail’s second-wave holiday shopping survey, fielded in mid-October, and new report, Shoppers Look Ready to Spend Big This Holiday—Will They Be Able To? Based on the data, consumers are less concerned than they had been in August that COVID-19 would prevent holiday celebrations, and a greater percentage—89 percent, 3 percentage points higher than in August—expect to purchase gifts for the upcoming holidays; expected spending was up about 5 percentage points compared with August.

Almost two-thirds of consumers said that spending will take place in a mix of online and physical stores. It’s even conceivable that consumer demand could continue growing in the short term if shoppers decide to buy sooner to snap-up items that are in short supply.

So, what strategies do retailers have to manage these issues? Here’s what some companies are doing already:

1)     Offering pay increases and other benefits to attract workers

In April 2021, 640,000 retail workers left their jobs, the largest one-month total in nearly 20 years. Retailers that held out hope for the lapse of pandemic unemployment benefits to draw employees back to work didn’t get their wish. Not only have these employees not returned, but other employees continue to leave at record rates. In August 2021, 4.3 million employees resigned, a quantity not seen in a single month (series) since the Bureau of Labor Statistics started tracking resignations,

Under these circumstances, it stands to reason that many large companies are willing to raise wages to recruit the thousands of employees needed for end-of-year shopping. There are innovative ways of bringing on seasonal workers: companies like Kohls and Macy’s are offering signing bonuses and referral bonuses, respectively, while other companies are offering huge discounts and employee perks. Retail behemoths like Walmart and Costco are simply raising their companywide minimum wages across the board. Given current political tailwinds spearheaded by movements such as the “Fight for $15,” it wouldn’t be surprising if other retailers followed suit.

2) Focusing less on seasonal hiring and more on current workers

Some stores, like Target, are doubling down on maintaining full-time retail staff while paring down their seasonal employees. In addition to offering five million more hours to current store workers, Target plans to pay employees an extra $2 an hour for peak days in the holiday season, on top of overtime pay.

Benefits can outweigh rewards going this route, especially because it can be a better use of resources than training employees for six weeks and letting them go. However, employers need to be mindful of the possibility of extended work hours needed to meet customer demands. In particular, hardworking employees need to be reminded of the importance of recording all time worked and taking their meal and rest breaks as scheduled. Violations of wage and hour laws can be costly mistakes for companies that do not monitor compliance carefully.

3) Addressing labor scheduling

Many retailers are getting smarter about scheduling, particularly in anticipation of being shorthanded. Stores are taking relevant factors, such as the rate of transactions and the traffic-by-hour trends, and planning accordingly. But they are starting to consider another compounding factor—flexibility. 

While retail often can be an all-hands-on-deck situation, giving employees more flexibility in scheduling seems to reflect the broad trends in new employee preferences brought on by the pandemic. Michaels, Belk and Joann are offering flexible scheduling for seasonal workers; meanwhile, Target has even allowed employees to trade shifts and create their schedules over smartphone apps.

With consumers taking a hybrid approach to their holiday spending, other stores are allocating more time for dedicated ship-from-store, buy online/pick up in store (BOPIS) and curbside delivery activities. This comes as no surprise—demand for online purchases with in-store pickup increases the need for customer service and the chance for an additional in-store sale.

4) Adjusting employment requirements

As companies evaluate applicants, they may find that their hiring criteria is misaligned or at least not fully in tune with job requirements. Changing the selection criteria can open up a pool of capable seasonal hires in a tight labor market. CVS recently announced it was dropping education requirements (such as a high school diploma or GED) for most entry-level roles. Additionally, many companies, including retailers, are moving away from drug testing for new hires.

5)  Implementing new training

For a second straight holiday season, many retailers are shouldering the additional cost of bringing employees up to speed on the latest cleaning and mask protocols, even as those vary based on federal, state and local guidelines. As more people crowd stores—which appears likely given the research noted above—retailers are balancing safety with shopper convenience, which is difficult, especially where social distancing is challenging or not an option. In response, some retailers have modified their store layouts to minimize crowding, using signs and ropes to guide foot traffic. 

In addition, integration across in-store and online offerings from distribution has increasingly been a part of retailers’ training priorities. Supply chain problems might mean that a desired item is out of stock in store, to the dismay of customers. Employees are being taught how to save the sale, contact other stores that may have a product in stock and have the item shipped directly to the customer, or to offer an in-store pickup at another store. At retailers such as Office Depot, stores even waive shipping charges.

 6) Assigning a “gatekeeper”

A watchful set of eyes can make a big difference. Some retail organizations have been creating a role in operations management, sometimes called a gatekeeper, who functions as a type of high-level compliance officer. 

A gatekeeper can help ensure processes are followed and labor practices are in compliance as stores get busier. A main objective of a gatekeeper is to ensure labor will be spent adequately to address safety concerns and sanitation protocols, even as stores encounter more foot traffic.

In addition, gatekeepers can work to prevent executive staff from overworking exempt mid-level employees and managers with hourly employee tasks. Off-the-clock work and overtime policies and practice during this busy period can be more closely managed as well.

2021 will present another holiday shopping season like no other. But retailers—especially those that struggled mightily even before last year’s pandemic-dampened shopping season—can have a profitable season if they get a few things right.