The State of the Retail Sector
The U.S. retail sector today is in some ways primed for change; in other ways, it is ill-positioned to pursue it. While retail is a heterogeneous sector, certain characterizations apply broadly. The industry as a whole is “overstored,” with more retail space than needed. Profit results are mixed: margins on sales are thin, but return on investment is handsome. Retail has been a favored target of private equity companies, and asset-stripping by such companies lies behind some high-profile retail bankruptcies in recent years. Ownership in the retail sector is highly consolidated and continuing to concentrate, with a handful of companies accounting for a large and growing share of total sales. Employment also is highly concentrated, although less extremely than sales.
1. The employment baseline and recent changes.
The 16 million people in retail (a statistic from “normal” times preceding the pandemic) consist above all of salespersons, cashiers, stockers, and supervisors of these workers. With the exception of managers, supervisors, and health care workers, these are relatively low-paid occupations, with high turnover, low formal credential requirements, and limited presence of unions across the United States. Some broad trends in employment are discernible in the data. E-commerce is of course enjoying rapid growth in employment, but the trajectories of the different retail subsectors have diverged widely. In the years since 2011, as the economy shifted from bust to boom, grocery employment grew briskly (though it has plateaued in recent years, pre-pandemic), clothing stores have stagnated, and general merchandise has had mixed fortunes, with department stores struggling but other sections of general merchandise, such as big box sellers and dollar stores, continuing to grow. The job losses are due in part to e-commerce, but also in important part to the continuing growth in the dominance of discounters, including the big box players and dollar stores, which are growing at the expense of department stores and apparel retailers. Their leaner staffing models lead to overall drops in employment.
These changing fortunes have affected some sociodemographic groups more than others. Cashiers in grocery and salespeople in apparel and general merchandise have taken significant hits—and, of note, these jobs predominantly are held by women. The bleeding of department stores stirs concern because the general merchandise sector employs far higher percentages of women and people of color than retail as a whole, and far more than e-commerce, whose workforce is considerably whiter and more male than retail overall.
2. Stores will survive, but will change.
Despite continuing talk of a “retail apocalypse,” retail stores remain a durable way of selling, and we expect them to remain so. As of late 2019, e-commerce sales still only amounted to less than 10% of retail sales, and there were conflicting data on whether store openings or closings were more numerous that year. An April 2020 survey found that in the midst of widespread shelter-in-place policies and warnings about the dangers of person-to-person contact, 70% of Americans still were buying their groceries in stores. A set of advantages of store-based shopping contributes to the continued dominance of stores in today’s worst-case scenario, and will continue to matter long after. Customers will continue to want to look at products up close, get personalized advice, and have human interactions. Retailers will continue to want stores to communicate with customers in compelling fashion, to observe and learn about those customers (increasingly aided by new technology), and to have dispersed locations for delivery or pickup of online sales. And store-based shopping eliminates the added cost of delivery that otherwise must be shouldered by either merchants or consumers. Importantly for the retail workforce, though stores are here to stay, the mix of job activities and functions taking place within stores is changing and will continue to change—an issue at least as important as potential job destruction.
3. Store objectives and high-level strategies.
Store-based retailers currently are dealing with coronavirus-created crises, ranging from simple survival, to meeting changed consumer demands, to ensuring safety. In the longer run, at least for the large majority of retailers that will survive these challenges, their three central objectives are going to be the same ones we found in our 2018–19 fieldwork: reserve their existing market share in face of the assault from Amazon and other e-commerce sellers, develop new revenue streams, and cut operating costs. Store-based retailers have undertaken a variety of strategies to pursue these objectives. Many of the strategies rely heavily on technological investments, and we focus on these strategies in our report.