The retail industry is trying to figure out its correct size.
Faced with extremely high demand from shoppers during the pandemic, the retailer has spent the past three years strengthening its operations in areas such as human resources, finance and technology. Times have changed now.
The masses, who rushed to buy all kinds of goods early in the pandemic, are now spending less on goods such as furniture and clothing. is. Consumers are also concerned about rising prices for commodities such as food, and companies are taking protective measures.
Hudson Bay-owned off-price retailer Saks Off 5th laid off an unspecified number of employees on Tuesday. Saks.com is laying off about 100 employees, or her 3.5% of its workforce. Stitch Fix laid off 20% of his office workers this month and closed a distribution center in Salt Lake City. Last week, Wayfair announced it would lay off 1,750 of its employees, or 10% of its workforce, while Amazon began laying off 18,000 of its employees. Many of them are in the retail sector. Bed Bath & Beyond cut its workforce this month to strengthen its finances and prepare for a potential bankruptcy filing.
While it’s not uncommon for major retailers to announce store closures and some job cuts after the holiday blitz, the latest spate of layoffs has seen the industry slow down after rapid growth driven by pandemic-fueled shopping. It’s all about structural change as the US realigns. It’s also accompanied by widespread concerns about the state of the US economy and layoffs by prominent tech companies.
Catherine Leppard, global retail market leader at executive search firm Heidrick & Struggles, said: “They don’t know how long this cold economy will last and want to have adequate cash to weather it. I mean.”
Sales during the all-important holiday shopping season were weaker than previous years, when growth rates reached record levels. December retail sales were up 6% from a year earlier, but the figure wasn’t adjusted for inflation and was 6.5%.
Department store sales fell sharply. At Nordstrom, his sales in the final nine weeks of 2022 fell 3.5% year-on-year, with the company saying it was “softer than pre-pandemic levels.” Macy’s said holiday sale sales were below expectations.
Layoffs at some retailers show the industry is bracing for a slowdown and another shift in how people shop.
“We have made changes to streamline our organizational structure to mitigate macroeconomic headwinds and position our business optimally for success,” Saks Off 5th spokeswoman Megan Biango said in a statement. “As part of this, we have made the difficult decision to say goodbye to employees in various areas of our business.” .
Not all retailers are on the defensive. Walmart, for example, announced this week that it would raise the minimum wage for its store employees in a bid to attract and retain workers in a tight labor market.
Still, some retailers are more focused on retaining customers acquired during the pandemic than on acquiring new customers (an expensive business).
“There is a sense of conservatism,” says Brian Walker, chief strategy officer at Bloomreach. “They are still adapting in many ways to this omnichannel retail environment and perhaps see this as a critical time to align their organization and have the right people in place to see the real and potential possibilities. We need to make sure there aren’t too many people in order to survive the storm.”
That means fewer projects that require a lot of money and time, and more investment in helping the company see immediate results, says Walker.
Leppard agreed. “This is not a really creative, high-risk economy,” she said. “We may set back some of that innovation in future investments to make sure they keep pace.”
It’s also a time to evaluate the e-commerce features retailers need. In the early days of the pandemic, online sales exploded as many brick-and-mortar stores closed. Its growth is slowing. According to Bloomreach Commerce Pulse data, North American e-commerce traffic in the third quarter of 2022 fell by 1.6% compared to the same period last year. The conversion rate (a measure of those who purchased the product after seeing the ad) dropped him by 12% over the same period.
Craig Johnson, president of Customer Growth Partners, a retail advisory firm that has tracked the industry for 25 years, said: “This works like a ratchet. It may go up to 27%, but it will normalize,” he added, adding that many stores were grappling with his COVID restrictions and closures during the pandemic. The first mentioned his share of total e-commerce spending for the year.
At a time when online spending was on the rise, many businesses were clamoring to play a role in helping meet demand. Now they have to adapt to the new reality. In a memo to employees last Friday, Wayfair CEO Niraj Shah said, “Unfortunately, we overcomplicated things along the way, lost sight of some of the basics, and simply got too big. The company reported a 9% year-over-year drop in net revenue in November and is aiming to save $1.4 billion.
In the luxury sector, shopper demand is still there, but restructuring is needed to continue to innovate. As part of the headcount reduction, Saks.com also separated its technical and operations teams.
Sachs spokeswoman Nicole Schoenberg said in a statement: “We are on track as a digital luxury pure play company that needs to optimize its business to ensure it is optimally positioned for the future. “These changes are never easy, but they are necessary for our future success.”
Headcount reductions may help cut costs in the short term, but retailers will have trouble in the future if they don’t also address ways to improve the customer experience online, says the retail strategy group. Founder Riza Amurani said: merchandising and planning strategy.
“Like Wayfair and many digital players, what we have seen in the last three years is that they have scaled and grown rapidly,” said Amlani. “They were relying on the influx of spending across digital. They didn’t invest where they needed to invest.”
The retail layoffs are a turning point from 2021, when companies were unable to hire frontline workers quickly enough. After the initial shock of the pandemic, which saw many retailers furlough or lay off employees, many people received stimulus checks from the government. They wanted to spend the money. When businesses needed to ramp up in-store service again, they often struggled to find enough workers.
Walker recalled that some retailers may pause before laying off workers this time around. Businesses don’t want to be stuck without enough employees.
However, the coming months could be tough for retailers as margins shrink and revenue growth slows compared to previous years. In such an environment, investors generally prefer large companies to take steps to cut costs. Once layoffs begin, a kind of industry groupthink can begin.
“If some companies start doing that,” said Peter Capelli, a professor of management and human resources at the Wharton School of the University of Pennsylvania. not doing what others are doing. “