Boats on water in docks.

Changing retail landscape leads to decline in employee numbers

21 November 2019. Published by Kelly Thomson, Legal Director and Josh Tonks, Paralegal

The retail sector continues to face change and challenge from every conceivable angle and employment within the sector is following this trend.

In the current climate, with low consumer confidence and the ever-growing presence of online and digital retail, traditional retailers must create, adapt and remain agile if they are to survive and grow. And they are navigating these waters with an increasingly lean crew of people. 

The BRC recently produced a report on Q3 2019, highlighting that employee numbers and total number of hours worked in the sector are decreasing, as illustrated by the following figures:

  • Full-time employment decreasing by 4.5%;
  • Part-time employment decreasing by 1.5%; and
  • Total hours falling by 2.6%, with full-time hours decreasing by 3.2% and part-time hours by 2%.

The continued decline in Q3 represents the 15th consecutive quarter of year-on-year decline, and in comparison to last quarter's figures the rate of decline is increasing. When compared to Q3 2018, the total number of employees fell by 2.8%, which equates to around 85,000 jobs lost year on year

With this trend, the retail sector finds itself in a unique position within the UK labour market. The ONS reports that UK employment as a whole increased by 0.3% on the year.

Digging deeper

The expectation is that this decline in retail employment is due to continue, and there are several factors attributing to this. This is despite a predicted temporary increase in Q4 to cover the upcoming peak trading periods.

The ongoing structural disruption within the sector is presenting high street retailers with an unpredictable environment, stifling potential growth as they focus on adaptation and survival. This is emphasised by the fact that store growth has slowed to a rate of 0.7%, down from 1.7% and 2.3% in the previous two quarters.

Weak consumer spending has also played a considerable role and, when combined with extensive competition across all sub-sectors in the market, results in a tough trading climate that has already consumed the likes of Karen Millen and Coast and will likely eclipse more if they are unable to adapt at the necessary pace. 

The rise in national minimum wage and the apprenticeship levy is putting increased pressure on cash-strapped retailers and forcing them to re-evaluate headcount and the hours their employees are working, to keep operating costs in check. This is exacerbated by the increase in the relative cost of goods due to the weakened pound following the uncertainty of Brexit which is concurrently narrowing profit margins.

Ultimately, the combination of myriad influences is making it exceptionally difficult for many retailers to maintain their current business model. The reality is that the workforce is often the first area of the business to face cuts in an attempt to counter-balance these pressures.

The role of online retail

The contrast in the environments for bricks and mortar versus online retail is stark. Since 2015, bricks and mortar has seen 4,000 stores close, claiming sites from the likes of Marks & Spencer, Mothercare and Bon Marché. These closures and the accompanying redundancies contribute to the decline which the BRC reports and are indicative of the shift towards more streamlined services both physical and digital.

At a micro-level, the stores that have been able to thrive in the current environment have been home-improvement stores and supermarkets, which have seen 1,000 and 925 new stores open since 2015. In contrast, clothing and footwear stores have been the hardest hit, closing 2,140 units in the same timeframe.

Online retail has seen the emergence of 20,000 entities since 2015, demonstrating the lucrative nature these ventures present, with their low entry costs and potential for significant profits. This accessibility explains why the growth (at a rate of 80% between 2015 and 2019) has been so prolific.

The solution?

BRC Chief Executive, Helen Dickinson OBE has commented on the current retail landscape, raising concerns about the efforts of the Government in response to the ongoing struggles the sector faces. She states that:

“The Government should enact policies that enable retailers to invest more in the millions of people who choose to build their careers in retail. In order to promote innovation, training and productivity, Government must reform both the broken business rates system, and the inflexibilities of the apprenticeship levy. This will allow retailers to focus on enhancing their digital and physical offerings for customers, support the development of employees and ensure high streets remain diverse and exciting places for everyone.”

The solution proposed by Helen Dickinson has been echoed by others in the retail sector as many have pointed to the inadequacies of the current business rate system as being influential in the sector's decline. It is believed that without radical reform of the business rate system, retailers face an uphill struggle, one that is only exacerbated with the additional challenges wrought by Brexit and the rise of online players.