Beyond the Minimum Wage: What Factors Drive Employee Turnover in Retail?

Retail is the US’s largest private-sector employer, contributing $5.3 trillion to the annual GDP and supporting more than 1 in 4 jobs in the country (55 million working Americans).

However, the retail industry is plagued by high turnover rates that exceed the average in other sectors. As of May 2024, the average employee turnover rate in the retail industry was 4.0% compared to 3.4% across all sectors, according to the US Bureau of Labor Statistics.

So, what’s fueling this high employee turnover in the retail industry, and what can retail employers do about it?

Factors Contributing to Employee Turnover Rate in the Retail Industry

First, let’s understand the unique obstacles that make retail companies prone to poor employee retention and high staff turnover rates.

Misaligned Expectations

Mismanagement of expectations is a prominent reason for high turnover rates in the retail sector. For job applicants, working for their favorite brand in a flagship store might seem like a dream job, but once they accept the offer, they may find a different reality.

Many retail roles require workers to be on their feet for hours on end and serve demanding customers—all while maintaining a positive, friendly demeanor. That’s worlds apart from the experience of casually walking around a store as a customer!

Lack of Flexibility

Unlike other industries that provide workers the flexibility to work remotely, most retail employees need to be in-store to cover the front line of customer experience.

In addition, retail employment typically involves working challenging hours, including weekends, evenings, and extra shifts. And during holiday seasons, when retail workers’ friends and families are enjoying fun and festivities, they find themselves at their busiest.

No Career Development Paths

Many people working in retail don’t view it as a viable long-term career. Some candidates may accept a role in retail because they know it’s a place where they can gain many transferable skills, such as customer service, conflict management, and project management. But for many, it’s little more than a stepping stone to higher-paying, more flexible employment.

Equally, many retail employees work part-time while studying and move into new careers when they complete their studies.

Health and Safety Concerns

With rising inflation and cost-of-living pressures, customer abuse incidents in retail environments have increased, contributing to the industry’s high turnover rates.

According to a recent survey, in the past year, brick-and-mortar retailers have seen more crime, violence, and theft occurring within their stores:

• The number of violent shoplifting events rose by over one-third, with 88% of retailers saying that today’s shoplifters are more aggressive than in the past.
• Respondents said they had experienced a range of crime, theft, and unsafe situations in their stores, with petty theft (64%) at the top of the list.
• Hostile customer interactions ranked second, with (47%) of respondents experiencing verbal or physical abuse, followed by grab-and-run incidents (44%).
• 1 in 4 employees say they have considered leaving retail due to safety concerns.

Low Compensation

The average hourly pay for a retail employee in the US is just $13.85.

While wages could be as high as $17.55 (or as low as $6.73), most retail wages range between $10.10 and $16.35. The average pay range for a retail employee varies little (about $6.25), which suggests that regardless of location, there are few opportunities for increased pay or advancement, even with several years of experience.

Strategies to Reduce Employee Turnover in Retail

Persistently high turnover rates in retail not only affect businesses in the long run but also disrupt the day-to-day operations of other workers, managers, and customers. So, let’s consider some strategies retail employers can use to stem the tide of turnover.

Offer More Competitive Pay

With the current state of high inflation, retail businesses must reevaluate and offer higher wages to help their workers cope with increased living costs. While retailers are under pressure to juggle tighter margins, if they can’t or won’t pay their staff what they’re worth, workers will find someone who can.

Simple steps like being more transparent about pay can make a huge difference.

Even more important is knowing what a “competitive” wage is by tracking the market. Using a benchmarking tool can help retailers set reliable and relevant salaries and manage their annual salary budget more effectively. With just a few clicks, your HR team can access localized, reliable job market data to help make accurate, data-driven pay decisions.

Keep Employees Safe

Retail workers who feel safe will stay longer. While employers can’t eradicate violence entirely, they can take practical steps to improve their workers ability to recognize, de-escalate, and manage potentially violent situations at work.

Employee training in this area should cover essential topics, such as prioritizing customer needs, de-escalation techniques, awareness of active shooter situations, handling sexual harassment, non-violent crisis intervention, and ensuring emergency preparedness.

In the case of emergency situations, leveraging modern communication channels like mobile safety apps or panic button solutions can go a long way in connecting in-store employees, security personnel, corporate retail entities, and first responders.

Highlight Opportunities for Career Progression

The perceived lack of a traditional career ladder is one clear reason why the retail turnover rate is so high. If someone is bored of being on the shop floor, they might assume the only solution is to look for a different job altogether.

But the truth is that retail does have a career ladder. Employers just need to make this clearer to their workers, especially when monitoring their feedback and satisfaction rates.

Employers should talk to their people about their brand’s opportunities in other roles, such as:

• Retail field management (e.g., area or regional managers).
• Speaking with high-profile clients.
• Hosting events.
• Travel opportunities around the country.
• Visual merchandising.
• Training.
• Product technology.
• Other corporate positions, such as HR, marketing, strategic planning, etc.

Hire Employees from Diverse Demographic Groups

As we explored earlier, students make great retail employees, but they often don’t picture themselves in retail forever. This makes them more likely to quit than other workers.

Equally, more mature or long-term workers may become frustrated with the seasonal nature of the business. If they constantly feel under or overworked, they may look for more stable positions elsewhere.

The answer is to diversify. Hire a mix of different ages, backgrounds, and personalities. This will help you build a small, loyal crew on regular schedules, and you can increase part-timers’ hours during busy periods.

Prioritize Open Communication

Retail is a dynamic industry, and you never know when you’ll need to find someone to cover a busy shift at the last minute. While employers can’t plan for everything, they can make coordination easier with clear, effective communication.

Using a user-friendly employee chat app like Payactiv Connect allows you to notify employees about schedule changes and leave any specific instructions for the shift.

Better yet, you can also post open shifts for workers to claim and even allow them to swap shifts with one another. This increases the chances that you’ll find a team member who wants the extra hours rather than dealing with understaffing or having someone reluctantly agree to fill a shift.

Offer On-Demand Pay

Earned Wage Access (EWA) is an on-demand pay scheme through which employees have the option to gain almost instant access to their wages. It’s an evolution from the traditional biweekly or monthly payroll model.

EWA is particularly valued by lower-income or hourly workers who often find themselves living from paycheck to paycheck. It’s an effective way to allow your employees timely and dignified access to cash.

EWA programs aren’t loans. That’s because employees have already performed the work they’re being paid for. EWA simply gives employees the option of collecting some of the wages they’ve earned ahead of their regular payday. They can transfer these funds to their bank account or card instantly.

Final Words

As we’ve explored, the issue of employee turnover in the retail sector is a complex and multi-faceted one. But the good news is that there is a range of practical steps you can take to make your employees feel they’ve selected a good employer and help keep those turnover rates to a minimum.

Payactiv is the partner of choice for businesses seeking to help their people fully engage in both work and life and remain loyal and happy in their work environment. Our all-in-one Livelihood benefits platform takes a holistic approach to improving financial wellness and increasing employee satisfaction.

Learn more about Payactiv’s Service, or book your demo now.

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