Millions of retail jobs at risk due to automation

automationAbout six to 7.5 million US retail jobs are at risk in coming years due to automation, leaving a large portion of the retail workforce as “stranded workers,” according to a study conducted by Cornerstone Capital Group and the Investor Responsibility Research Center Institute.

Retail cashiers are at highest risk for automation technologies and 73 per cent of these positions are held by women.

Approximately 16 million Americans are employed in retail, which represents 10 per cent of the nation’s working population and generates six per cent of US gross domestic product (GDP).

A lack of disclosure on key labour metrics by retailers puts investors in the dark on how these companies are responding and what the fate of their workers could be.

“This in-depth examination of retail automation gives investors insights as they consider investment risks and opportunities,” said Jon Lukomnik, executive director of Investor Responsibility Research Center Institute. “While the findings are important to investors, they should sound the alarm for economists and political leaders. The shrinking of retail jobs in many ways threatens to mirror the decline in manufacturing in the US. Moreover, in this case, workers at risk are already disproportionately working poor, so any disruption may cause strains in the social safety net and stresses on local tax revenues.”

Erika Karp, Cornerstone founder and CEO, said the retail landscape is changing rapidly and investors need to understand the social and governance issues impacting valuations for public companies in this sector.

“Retailers are facing a perfect storm: they need to balance demand for wage increases with the negative optics of future job losses. The winners in retail will be companies that provide recruitment, retention and training for workers and innovate with forward-thinking future store strategies,” Karp said.

The report also found about 36 per cent of retail workers currently receive some form of public assistance and the average retail worker is age 38. Contrary to public perceptions, 71 per cent of retail workers are full-time employees.

According to the study, with about 30 companies analysed in the report, most are considering the use of instore technology such as mobile devices, self-checkout, digital kiosks and proximity beacons. In addition, sensor-based checkouts and smart shelves are a growing technology, as found in Amazon Go stores.

The study has indicated that Walmart and other large retailers have greater market share in communities with less than 500,000 people. If employment trends correlate to market share location, retail automation by retailers could disproportionately impact these smaller communities.

Based on an assessment of how large, publicly-listed retail companies are positioned to manage automation and labour through the industry’s transition, key takeaways include:

  • No retailers appear to be pursuing a clear convenience strategy. Approximately 35 per cent of the assessed retailers are positioning towards an experience strategy. The remaining 65 per cent do not appear to have a clear strategy, at least as determinable by public disclosures.
  • On average, retail companies are moderately exposed to state minimum wage increases, although Sprouts is significantly more exposed than others. Only Costco, Nordstrom, Whole Foods, and Tiffany & Co. pay their cashiers and associates a wage at or above the poverty level for a family of four as calculated by the US Department of Health and Human Services.
  • Amazon, Best Buy, Lowe’s, Staples, Target, and Wal-Mart stand out as investing in their labour through programs such as tuition reimbursement and technical and programming training, which is consistent with their strong employee ratings.
  • Dollar General and Wal-Mart receive the most negative scores on social policies and public reputation from the data sources utilised, while Costco scores most favorably. Data sources include Mission Measurement and Sustainalytics.

 

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