Rethinking Retail: Industry Still Adding Jobs

Posted on March 16, 2017

After Biggest Job Gain in 2017, CRE Opportunities Seen in Shifting and Expanding Retail Sector

With all of the recent news on thousands of retail store closings, consider this: retailers are still adding more jobs than they are cutting, which reflects the larger economic shifts affecting the industry.

It’s very true that retail continues to lead all sectors in job cuts as the industry pivots toward online sales and shrinks brick-and-mortar operations. Retailers announced 11,889 job cuts in February for a 2017 two-month total of 34,380.

Retail job cuts are nearly 580% more than the 5,930 jobs eliminated in the energy sector, the next highest industry so far this year, according to global outplacement and executive coaching firm Challenger, Gray & Christmas Inc.

However, the retail sector also experienced the most job gains in January 2017 among sectors, with 46,000 jobs added, according to the latest data from the Bureau of Labor Statistics. In fact, since the end of the recent recession in 2009, retail employment has increased by about half a million jobs per year and total retail employment surpassed pre-recession peaks two years ago. The industry now employs about 15.9 million workers, according to the BLS.

Rather than an industry in decline, retail appears to be an industry going through a major transformation based on the employment pattern.

Breaking down the employment numbers by subsectors in the retail trade, motor vehicle and parts dealers, gasoline stations, food and beverage stores, and health and personal care stores were all sectors that have experienced recent growth and now employ more workers than before 2007, according to BLS data.

Nearing their previous employment peaks are building material and garden supply stores, as well as miscellaneous store retailers, such as office supply stores.

Sporting goods, hobby, book and music stores surpassed their previous employment level peaks two years ago, but have since been on a downward slide.

Furniture and home furnishings stores, clothing and clothing accessories stores, and electronics and appliance stores have been bouncing along the bottom in employment growth for several years. Furniture is starting a slow climb upward but clothing and electronics are again showing declining employment.

Surprisingly, departments stores (classified under general merchandise stores) were the fastest to recover and surpassed their employment peak in 2011 and have continued to grow.

The fastest rising retail employment category by far has been the non-store retailers, which includes ecommerce shopping and mail-order houses, and other direct selling establishments. That sector, which had the fewest number of employees prior to the recession, now employs more workers than electronics and appliance retailers and furniture and home furnishings retailers, according to the BLS.

“Retailers are experiencing a tremendous transformation from the traditional business model. The cost of digitizing merchandise, moving sales online and downsizing physical stores will likely take a toll on employees in this field,” said Andrew Challenger, vice president of Challenger, Gray & Christmas.

Despite the job cuts, Challenger expects the shift will ultimately create new opportunities for job seekers with the requisite skills.

“The new retail employee will need considerable tech abilities, in addition to the necessary customer service experience,” Challenger added.

Implications for Retail Real Estate Investors

The shifting retail sector requires adjustments on the part of real estate investors, said Van Hesser, senior managing director of Kroll Bond Rating Agency in new report this month.

“We believe business risk in the retail sector overall has structurally increased. We also believe that it is overly simplistic to paint the entire sector with the same broad brush. Retailing is a nuanced business,” Hesser said.

The common thread Hesser sees running through recent news announcements on Macy’s and other retailers scaling back is the struggle on the part of traditional retailing formats to adapt to changing consumer preferences, driven by the internet and social media ecosystems.

“This has very real implications for those on the wrong side of these forces,” Hesser said. “But, by the same token, those benefitting from or less impacted by these changes are faring much better.”

The future of the retail industry will be in creating omni-channel offerings that integrate the online and bricks-and-mortar experience. As formerly e-commerce-only outlets begin to open physical storefronts, it appears brick-and-mortar retail will always have a place, but with a digital-age makeover, Hesser noted.