Hay Group study finds employee turnover in Retail industry is slowly increasing

E-commerce growth and demand for part-time workers fueling employee turnover

PHILADELPHIA, PA – May 7, 2012 – Employee turnover levels in the retail industry are quietly rising according to a new survey from Hay Group, the global management consulting firm. With an improving job market and solid first quarter sales, retailers are experiencing more movement among their store hourly workers. Retailers report a median turnover rate of 67 percent for part-time store workers, a 33 percent increase over 2011. One in five retailers report that they have experienced more turnover in the first part of 2012.

“Higher employee turnover is a double-edged sword,” said Maryam Morse, national reward practice leader of Hay Group’s Retail practice. “On one hand, it’s a harbinger of an improving economy, but on the other it’s a significant challenge for retailers who will need to devote more time and resources to retention and recruiting. Retailers are very focused on profitability right now, which is likely leading to an increased demand for part-time workers, who can be scheduled to work at only the highest traffic times.”

For the remainder of 2012, 82 percent of retailers surveyed expect to see the most turnover among their store hourly workers. Nearly one-third of respondents say they expect to see high levels of turnover among hourly workers at distribution centers.

Hay Group’s survey analyzed responses from 54 major U.S. retailers including Ascena Retail, Carter's, Meijer, OfficeMax, Petco, PetSmart, Ross Stores, The Limited and Zale Corporation to determine the rate of turnover for key positions within retail organizations, and related retention strategies.

Click here to see the median employee turnover rates.

Booming Online Channels Fuel Turnover. Growth in e-commerce and mobile channels is escalating a talent challenge at both corporate offices and distribution centers. With more retail and technology companies competing for the same talent, turnover rates in corporate e-commerce positions are nearly double 2011 levels. E-commerce growth has led to the development of more online fulfilment centers, creating greater opportunities and turnover among both hourly workers and management positions at distribution centers. Over the past year, the turnover rate for hourly workers at distribution centers increased by 29 percent.

Emphasis on Career Growth and Training. Turnover concerns have retailers focusing more on retention. When asked about key tactics for reducing turnover, 61 percent of retailers cite career pathing and 54 percent point to training. Only 30 percent cite changes to compensation plans. In positions with higher turnover, 74 percent of retailers report that pursuit of better opportunities was the primary exit reason, rather than a higher salary (44 percent).

“Employees have greater longevity with an organization when they are satisfied with their growth and future opportunities. Compensation should be internally equitable and externally competitive, but it’s not typically a differentiator that drives people to leave,” noted Morse.

Paying to Retain High Performers. Although compensation is not the top strategy for retaining employees overall, Hay Group’s March 2012 survey of retailers’ salary budgets found that it is one of the tools used to hold on to high performers. Retailers have budgeted an average of 3.6 percent in merit increases for top performers this year, up from 3.2 percent in 2011 and notably more than the 2.8 percent planned for employees overall this year.

Turnover Costs at Pre-Recession Levels. As the economy stabilizes, more than half (53 percent) of retailers report that the cost of turnover at their organization is about the same as it was at the beginning of the recession in 2007. Most retailers (53 percent) also say turnover costs have largely held steady over the past year, but it’s slowly starting to change with 26 percent reporting that costs have increased.

To arrange an interview with Maryam Morse, please contact Keri Toomey at 212-584-5471 or keri@blisspr.com.

About Hay Group
Hay Group is a global consulting firm that works with leaders to transform strategy into reality. We develop talent, organize people to be more effective, and motivate them to perform at their best. With 85 offices in 48 countries, we work with over 7,000 clients across the world. Our clients are from the private, public, and not-for-profit sectors, across every major industry and represent diverse business challenges. Our focus is on making change happen and helping people and organizations realize their potential.