Why employee retention still matters amid automation

The ongoing cost-of-doing-business crisis has prompted many retailers to cut jobs and embrace automation. It’s a risky gambit that could backfire on them in the longer term

Shop workers

Customer service has always been an important differentiator in retail, but difficult trading conditions over the past year have obliged many players in this sector to focus more on cutting costs and raising prices to shore up their margins and preserve profitability in the short term. 

One of their favoured ways to do this has been to digitise and automate various aspects of the business. The appeal of such a move is obvious: automation should boost efficiency and get round the labour and skills shortages that many employers in the sector are experiencing. And rapid advances in conversational AI have been making that all the more achievable. 

But this hard-nosed emphasis on the financials seems to be pointing towards job cuts, particularly among the bigger players. In April, for instance, US supermarket giant Walmart announced that it expected about 65% of its stores to be automated by 2027. This came just days after it revealed plans to lay off more than 2,000 people at facilities fulfilling online orders.

In other words, retailers are favouring a quick-fix approach, replacing staff with technology in a bid to cut their overheads and preserve their bottom lines. But this is at odds with decades of people-centric business strategy and it’s also a risky option, even in a no-frills business. That’s the view of Tamsin McLaren, senior lecturer in marketing at the University of Bath’s School of Management and the Bath Retail Lab. 

“Ecommerce is giving consumers more choice than ever before, which means that customers have higher expectations,” she says. “If retailers continue to take such a short-termist approach in this highly competitive market, customers will vote with their feet and wallets.”

Is customer service in retail getting worse?

Customer service does indeed seem to be deteriorating, with shoppers noticing the lack of a human touch in retail. The Institute of Customer Service’s 2023 UK Customer Satisfaction Index reveals that discontent across all sectors is higher than at any time since 2015. In food retail, for instance, the average satisfaction score has fallen by 2.2 points on the previous year to 79.5 out of 100. 

Retail is basically cutting off its nose to spite its face

“Until there’s a sector-wide recognition of cause and effect and the value of long-term, rather than short-term, thinking, retail is basically cutting off its nose to spite its face,” McLaren warns. “Retailers may say they’re concerned about staff and skills shortages. But their problems won’t go away until there’s sector-wide action to incentivise employees to stay and remain engaged.”

While it has long been a factor in retail, staff turnover is really becoming a problem. The British Retail Consortium’s HR Benchmark Q1 2023 report states that the sector’s average staff turnover rate is now 50.8%, compared with an average of 33.6% across all industries last year, according to Gallup. 

What does automation mean for staffing levels in retail?

Assuming that total automation is not on the horizon, part of the future staffing challenge for retail will be its changing skills requirements. Indeed, as investment in automation increases, the industry is steadily finding itself competing with other sectors for tech-literate candidates. 

Luiza Gomes is employment policy adviser at the British Retail Consortium. She reports that the hardest roles to fill in retail are tech-related – for instance, IT solutions engineers, architects, programmers and web developers – but adds that even shopfloor roles are starting to require a “certain level of digital literacy”. 

As a result, “the nature of these jobs is becoming more expert across the board”, which should mean that they become “better and more rewarding”. But it also means that departing employees will become more difficult to replace. 

“Retention will become more of a problem as the sector becomes more skilled, so it’s important to recruit the right people from the outset,” Gomes warns.

Retrain people to retain them

One solution might be to retrain more employees to prepare them for the era of automation. Jess Munday is co-founder and head of people and culture at Custom Neon, a bespoke sign maker and etailer. Her focus is less on recruiting new people and more on training existing employees to ensure that they can handle the business’s changing requirements.

The human element isn’t something we can afford to lose

To this end, the firm is taking a two-pronged approach. The first involves selectively automating back-end operations such as logistics and inventory analysis. The aim here is to improve operational efficiency, cut costs and give the team more time to focus on customer service.

The company is more “cautious about bringing automation to the front end”, Munday says. For one thing, human interaction is vital in customer service, and she also acknowledges that “some team members have found it hard to adapt to new technologies”. This is where the second prong applies. 

“We introduced upskilling programmes and even redefined some roles to align better with the evolving needs of the business,” Munday explains. “Sometimes, it’s not only about finding the right people for the job; it’s also about finding the right job for the people you have.”

How to make the most of the human touch in retail

As for Custom Neon’s secret to staff retention – which stands at 85% in the UK – Munday believes that it’s about more than merely providing decent remuneration. It’s also about ensuring that employees feel “valued, trusted and invested in”.

The retailer does this by providing ongoing coaching and mentoring opportunities, flexible working, team bonding activities and volunteer days. 

“The human element isn’t something we can afford to lose”, Munday says. In fact, she believes the ability to offer customers “the human touch” will be the organisation’s trump card as retail becomes ever more tech-driven.

“As we navigate this shift, keeping hold of the talented individuals who can blend technological savvy with emotional intelligence will be crucial,” Munday says. “These are the folks who can make or break customer loyalty – something that no amount of automation can achieve.”