Retailing's next decade

American Demographics, May, 1997 by Diane Crispell

Retail employment grew in the past decade, but worker's earnings dropped. Both jobs and incomes could grow in the future, but the way retailers address employee and customer needs will determine who's still selling wares in the 21st century.

Whether we buy our clothing, food, cars, and other necessities and luxuries at stores, through catalogs, or online, the dollars we spend on goods pour into the retail sector of the economy. Shopping may consume less of our time than it used to, but it still consumes lots of our money.

The retail-trade industry accounted for 9 percent of the U. S. Gross Domestic Product in 1993. Some of this money cycles through the retail sector more than once; it is first paid out in the form of earnings to retail workers, then returned to the industry by those workers when the themselves shop. Even more of the economy is indirectly related to the retail industry in that many of the goods produced by the manufacturing sector and processed through the wholesale sector are ultimately sold at the retail level.

Retail employment in the US. stood at 21 million in 1995, 18 percent of all nonfarm wage and salary employees, according to the Bureau of Labor Statistics. This includes everyone from the executives who run national store chains to entrepreneurial shop owners to the sales clerks who populate most stores in the country.

Although retail trade is not a service industry, it does fall into the service-producing sector of the economy because retailers provide services to customers, rather than producing goods. One of the obstacles they face is the fact that front-line retail jobs are often held by people with little experience and not much incentive. Many are teens and young adults doing their first "real" job. Some stick with it, but most move on. Other retail workers are adults who are unsuited for many other types of work because of educational, language, or other limitations. Temporary or long-term, both groups can be divided into the willing and conscientious versus the sullen and unmotivated.

The scenario is a natural set-up for high turnover, one of the biggest and most costly problems facing retail managers.

"Retailers do a lot of really good customer satisfaction research." says Francesca Turchiano, president of In Fact in New York City. This may result in decisions made about product mix, advertising, and even store layout and display, "but you don't really see that it has any effect on the encounter in the store," says Turchiano. Yet the fact remains that much of a store's image derives from the impression customers have of its staff. It's easy to tell the difference between a fast cashier and a slow one, between a knowledgeable sales clerk and an unhelpful one.

"The troubles that have plagued much of the retail industry, especially malls and supermarkets, have resulted in their being especially stingy with workers, which has a Catch-22 effect," says Turchiano. In other words, when workers don't have an incentive to work harder, the quality of service declines, which further discourages employers from rewarding workers, and so the cycle continues.

RETAIL EARNINGS

One way to judge a job is by the pay. In 1986, retail workers in Anchorage made more on average than those in any other metropolitan area, the equivalent of $26,700 in 1996 dollars, according to NPA Data Services of Washington, D.C. Since then, the Alaskan metro has fallen to third place, and per-worker earnings have slipped 17 percent, to $22,200 in constant 1996 dollars.

The drop in earnings was hardly unique to Anchorage. The average weekly earnings of all US. retail workers in 1995 were $222, according to the Bureau of Labor Statistics, compared with $244 in 1986 (in 1995 dollars). Retail earnings per worker fell in all but nine metros between 1986 and 1996, after adjusting for inflation. San Francisco topped the per-worker-earnings ranking in 1996, at $23,200, but this was down from $25,100 in 1986.

Earnings per worker fell the most in smaller metros where they were pretty low to begin with. Of the ten metros with the greatest dropoffs, five were in Texas and three others were also in the South. All but two provided below-average earnings per retail worker in 1996, and three ranked among the 20 smallest retail employers in the country -- Enid and Lawton in Oklahoma; and San Angelo, Texas.

The few places that saw real growth in retail wages in the past decade were also on the small side. Retail employees in Jackson, Tennessee, made 7 percent more in 1996 than in 1986; those in Yolo, California, made 6.6 percent more; and those in Janesville-Beloit, Wisconsin, made 5 percent more.

Future earnings of retail workers depend on unpredictable economic events. But assuming that the overall economy grows, NPA Data Services expects that no metro will see declines in per-worker retail earnings between 1996 and 2006. Because these projections assume less economic variation among metros than has historically been the case, the range of projected earnings is narrower than in the past decade. Although Yolo saw the second-fastest earnings growth in the past decade and may see even faster growth in the next decade, the projected gain could be the slowest of all metros in the next ten years, as the others catch up. Earnings growth per retail employee between 1996 and 2006 could range from 8 percent in Yolo to 24 percent in Cumberland, Maryland-West Virginia.