LP Magazine EU

Industry Focus

The Cinderella Paradox

We are all used to the term “value retailing,” the delivery of more for less, a paradoxical concept that is predicated on the need to reduce costs by optimising efficiencies from supply chain to store. However, the term has come into sharp focus over the last eighteen months of the pandemic because of this diminutive interpretation of the word “value”—the cost of the product to the customer—rather than the value of the industry to the nation as a whole, a distinction the Prime Minister alluded to in the early days of the first lockdown when the Government elevated the role of store and supply chain personnel to that of key worker status.

The discussion is even more nuanced as we look at the landscape of recruitment and retention of retail, hospitality, and supply chain staff in the eye of the perfect storm of COVID-19 and Brexit, both of which have shone a light on the Cinderella paradox of an industry widely perceived as delivering value for money but not necessarily money (or investment) in the value of its personnel. 

Low-Earn, High-Churn Industry

The retail sector, the UK’s biggest employer, has always been seen as a low-earn, high-churn industry, both propped up by and propping up the gig economy of zero-hour, flexible working contracts while, paradoxically, offering a wide range of exciting and diverse roles. It is, in short, simultaneously providing both jobs for life and a life of jobs.

Loss prevention is a good example of a function that touches and influences every retail department in managing risk and adding value by reducing loss, but it often falls victim to its own success. Departments are regularly “restructured”—shorthand for downsized—when losses fall into “tolerable” percentages, but then rapidly reinvested in when figures begin to creep up. The coronavirus has brought this into even sharper focus with many anecdotal examples of the Cinderella paradox. 

One business brutally lost its entire audit team as a result of the pandemic, while another lost 40 per cent of its team and its cash-in-transit providers when card payments threatened the future of the currency, a “no cash, no risk” decision that may yet prove premature.

A combination of the pandemic and the so-called pingdemic—the requirement for colleagues who come into contact with an infected person to quarantine, rules that only ended last month—put unprecedented pressure on staffing levels across the retail, hospitality, and supply chain sectors that were already reeling from personnel shortages as a result of Brexit.

The Impact of Brexit

Prior to the end of June 2021, retail HR departments were managing the complex challenges of the Government’s deadline for “settled status” applications for EU workers who wish to remain in the UK as part of the Brexit process.

At this time, the Chartered Institute of Personnel and Development (CIPD) revealed there had been a rapid decline in the numbers of EU and international workers, fuelling the risk of labour shortages with almost one million vacancies listed on jobs websites for the retail, hospitality, events, and leisure sectors.

According to recruitment platform Adzuna, since February 2020 the number of overseas job searches from Western Europe and North America had halved—a decline of about 250,000.

“There is hot competition for staff, with many hospitality and retail workers having left the industry to look for more secure work after the ups and downs of the last year,” Adzuna co-founder Andrew Hunter said.

Business leaders have warned the Government that a lack of overseas workers after lockdown would put a “hand brake on the recovery,” with up to 1.3 million people estimated to have left the UK since late 2019.

According to the CIPD, the balance of employers expecting to add jobs, versus those planning to cut them, was 27 per cent for the second quarter, up from 11 per cent in the first three months of the year—the highest level since February 2013.

Unemployment in the UK has stabilised in recent months, thanks to the extension of the furlough scheme that comes to an end on September 30.

Before the pandemic, unemployment stood at 4 per cent and the Bank of England expects the unemployment rate to peak at almost 5.5 per cent after this time, lower than initial fears of a peak of 12 per cent, like that seen in the 1980s.

The Impact on Retail

The staff shortages have been highlighted in official figures. According to the Office for National Statistics (ONS), vacancies advertised across the UK in August rose to a post-pandemic high of 953,000 with unemployment falling to 4.7 per cent and average growth in wages rising to 7.4 per cent.

Fashion retailers were among the companies hit the hardest by the pandemic and the lockdowns that ensued, followed by smaller retailers that employ up to 1,000 staff. One only has to look at the number of CVAs and administrations since March 2020 to see the hundreds of store closures and thousands of job cuts the retail industry has endured.

Reasons that retail employment levels remain low may vary from potential younger workers being unvaccinated to working parents with a lack of access to childcare. Other reasons may be hesitancy to return to the front line after more than a year of lockdowns and tiered restrictions.

In the supply chain there is estimated to be a 100,000 shortfall of lorry drivers, principally fuelled by EU workers leaving the UK and the closure of HGV driver training centres for “homegrown” drivers, as a result of the pandemic.

The driver shortages have also led to extremes in retail behaviour. At one end there have been empty shelves in some major supermarkets while at the other, there has been an increase in wasted food that could not be delivered. According to Tesco, driver shortages were creating forty-eight tonnes of food waste each week, the equivalent of two truckloads, as reported in Retail Gazette.

Supermarkets are therefore responding by offering wage-inflated opportunities to drivers to leave their current employers and help maintain the delivery of food supplies, a move described by many logistics companies as creating an “artificial market” that is not sustainable in the longer-term.

HGV drivers contributed to a staggering 27.8 million pallets delivered by UK networks in the last year, a 3.2 per cent growth year-on-year. Sixty-three per cent of these were next-day delivery.

Caroline Green, CEO of logistics company Pallet-Track, said solving the 100,000-plus driver deficit goes beyond what one company can achieve but can be tackled with the support of the wider business community. 

She argues that the long-standing crisis has been compounded by the triple whammy of Brexit, the coronavirus, and a huge spike in demand for home deliveries. 

“We are a dynamic and progressive business in a critical sector that has historically been taken for granted. It has taken a pandemic for many people to wake up to the sector’s far-reaching contribution to everyday life. But drivers are still underappreciated, and this is contributing to the significant shortage we face,” Caroline explained.

“To tackle this, we need to build a lobbying strategy to ensure the industry is heard by Government, which is why we are asking all of our shareholder members to write to their local MPs.”

She added, “The logistics sector has more than demonstrated how critical it is to the UK’s infrastructure, keeping the wheels of UK plc turning during the pandemic, which has caused a dramatic increase in demand for kerbside deliveries of everyday products such as turf and slabs, as householders embarked on lockdown DIY, with the ratio of home deliveries increasing from one in ten pre-pandemic to one in four today.

“Our challenge now is to maintain that level of business recognition and understanding as the UK slowly re-emerges from lockdown and promote the role of drivers as both attractive and aspirational careers.”

According to Caroline, “The logistics industry is one which has historically had image problems for a variety of reasons, so if we can increase the recognition for its work in a post-lockdown world, we can go a long way towards addressing that issue.”

The Hospitality Sector

More than two-fifths (42%) of smaller retailers have said that Brexit has made hiring harder, compared to more than a third (35%) of larger retailers with over 5,000 employees.

The hospitality sector has also been hard hit by the recruitment crisis as many pubs, clubs, and restaurants were closed throughout the pandemic’s various lockdowns. During June 2021, Jobcentres launched a hiring drive to try to tackle the 188,000-worker shortage in the sector. 

Work coaches from Jobcentre Plus ran sessions on working in hospitality in every region of England, as well as across Scotland and Wales, and UK Hospitality (UKH) and the Department for Work and Pensions (DWP) teamed up to face the rising crisis. 

It comes after the UKH analysis found a vacancy rate in the hospitality industry of 9 per cent—equal to around 188,000 jobs. It found 80 per cent of the businesses surveyed had vacancies for front-of-house positions, meaning waiting and bar staff, while 85 per cent were looking for chefs. 

Minister for Employment Mims Davies MP said, “It’s been a challenging time for the hospitality sector, but our road map offers employers the confidence to hire, and our work coaches are helping them recruit local talent.”

She added, “At the same time, the Government’s Plan for Jobs initiative is levelling up opportunity across the UK, supporting workers of all ages to retrain, build new skills, and get back into work as we push to build back better.”

Interestingly, J. D. Wetherspoon founder and pro-Brexit supporter Tim Martin called for a “reasonably liberal immigration system” to help fill jobs. In June, he urged the Prime Minister to set up a visa scheme allowing workers from EU countries to easily come back and work in the UK.

Value Initiatives

In response, many retailers have launched new employee initiatives to beef up their employment numbers while also improving staff retention.

LVMH, Louis Vuitton’s parent company, launched an employee assistance programme for its 150,000 worldwide colleagues. The £30 million LVMH Heart Fund offers a free, anonymous, and confidential support hotline. The programme, operating across seventy countries, was set up to help employees deal with personal situations as well as day-to-day work issues.

Meanwhile, many retail businesses have joined the call for legislation to protect shopworkers against increased incidents of abuse, threats, and violence.

Further highlighting retail’s Cinderella paradox of value versus valued, Parliament’s Home Affairs Select Committee published a survey of 12,000 retail staff that found that two-thirds of shopworkers who reported incidents of abuse or violence suggested that no help was given to them after receiving an initial response from their employer or Police. In fact, only one in five shopworkers who reported incidents was satisfied with how the Police or their employer responded.

“Workplace well-being has become increasingly important since the pandemic,” said RetailTRUST chief executive Chris Brook-Carter.

“We’ve seen rates of mental ill health rise and a dramatic increase in the number of incidences of verbal, violent, and racial attacks on store staff,” Chris said. “Workers want to be reassured that their employers prioritise their physical, mental, and emotional well-being, so it’s a must for any business looking to attract new talent, especially in retail, to make these provisions.

“There are still so many fantastic opportunities for anyone looking to take on a new role and build a career in retail, but there is also some work to do in improving its reputation among new employees, partly as a result of much uncertainty in the sector over the last decade and in particular since the start of the pandemic.”

RetailTRUST said it spoke to HR directors and chief people officers at more than twenty big-name retailers for its new retail health report, which looks at how the industry can better support the well-being of its workers.

“If there’s one thing the pandemic has shown, it’s that a much more human way of leading is needed and wanted, and we would encourage retailers to put this into practice by developing mental-health-at-work plans with a real measurable impact on staff well-being,” Chris said.

“It is clear that the retail sector now has a vital role to play in building hope, health, and happiness as we move out of this crisis, and businesses who step up now will be rewarded with healthier and happier workers, a positive culture, and ultimately, business growth,” he added.

Business Response

It is not all doom and gloom. Tesco recently confirmed a 2.7 per cent wage increase for staff paid hourly rates, taking their wage from £9.30 to £9.55 per hour.

Benefits can also go beyond financial incentives. John Lewis & Partners will become the first UK retailer to launch six months of parenthood paid leave for both parents and two weeks paid leave for any employee who experiences the loss of a pregnancy.

From this autumn, all employees, regardless of how they have become a parent, will receive twenty-six weeks paid leave once they have worked for the partnership for one year. 

Any worker who experiences the loss of a pregnancy will not only be entitled to take two weeks of paid leave but will also have access to emotional support through the partnership’s free counselling and mental health services. 

The retailer is also beginning a “blended” working approach for office-based employees, giving workers choices about where and how they work.

John Lewis has identified more ways to support part-time workers through its internal Part-Time Advisory Group. This includes changes to the company’s flexible working policy and reviewing recruitment processes. 

The business, which also includes Waitrose, also said that it will help support ethnic minorities by expanding its reverse mentoring scheme, where ethnic minority employees from across the partnership mentor senior leaders. And it established a new inclusion committee in the summer, which featured external advisers who have strong diversity and inclusion experience, as well as its own internal employees. 

Earlier in the summer, John Lewis also started a pilot programme with Essex County Council to help young people aged eighteen to twenty-four leaving the care system into employment. The company said that it will help identify job opportunities via its current vacancies and provide support, including coaching, mentoring, and interview practice, in the run-up. 

“As an employee-owned business, equality matters to us,” said Sharon White, chairman of John Lewis & Partners. “We want John Lewis and Waitrose to be a place for everyone and for people from all walks of life to feel valued so they can thrive in our business.” 

Sharon added, “We want to be there for our partners to support them in important life moments, whether that’s stepping into the world of work for the first time or becoming a parent.

“The pandemic has been particularly hard for families juggling all sorts of different demands and pressures, and I am pleased—but not surprised—John Lewis & Partners has risen to the challenge to help both existing and future employees,” she said.  

Felicia Willow, chief executive of the Fawcett Society, the UK’s leading charity campaigning for gender equality and women’s rights, said that it was “great to see” the partnership supporting working mothers and fathers to look after their children. “We need more UK businesses to follow this example and enable both parents to take parental leave,” said Felicia. “The expectation that childcare falls to mothers helps the gender pay gap and many other workplace inequalities to thrive.”

Martyn Jones, chief commercial officer at retail communication service VoCoVo, said it was important to offer incentives such as mental health support, well-being packages, and additional holiday days.

“While incentives can be an effective way to entice potential employees, there is more to it than just that,” he said. “Retail workers are looking for recognition of their efforts over the past year and beyond, and organisations must all recognise the generational changes in employee attitudes.”

Martyn added, “For many, the hours they work are no longer measured just in how much they are paid, but instead they now want access to other perks, too—something that should be factored in when thinking about building out an attractive employee benefit package.”

Samantha Silva, head of retail EMEA at recruitment agency Quest Search & Selection, argued that retailers should offer incentives such as learning and training for new skills as well as less emphasis on zero-hour contracts and more consistent hours.

“People are engaged by things such as clothing allowances—if in fashion—or travel loans or assistance as a number of office-based people are still working from home and would not have this expenditure,” she said.

The pandemic has led to the growth in e-commerce and contactless collections, which arguably means retailers may need to shift their focus on a huge recruitment drive in delivery, fulfilment, and logistics jobs.

She adds that what remains clear is that COVID-19 has accelerated a mass shift towards online shopping, which appears to be here to stay. And if employers are looking to attract new workers, now is the time to offer training and development, encourage upskilling, or allow employees to further their knowledge across a wide range of areas.

Value and valued are not mutually exclusive concepts in the retail, hospitality, and logistics sectors, where aspiring and inspiring approaches could and should replace what has been seen as a traditional hiring and firing culture. Businesses are positively responding to the need to move away from the Cinderella paradox with longer-term solutions that nurture loyalty, providing a shop window of new incentives—a shoe that fits the right candidate.