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Retailers can’t hire fast enough, but retail startups are shedding workers to cut costs

The trend: Amid a labor shortage that shows no sign of receding, retailers are adopting a number of tactics, from boosting wages to adopting automation, to attract talent and maintain productivity.

  • At the same time, companies with a more tech-focused approach to retail, like Amazon, Reef Technology, Thrasio, and Uber, are either slowing their hiring or cutting workers in an effort to save money.

Walmart outmuscles competitors: For some retailers, lacking workers is not an option. Walmart, the US’ largest private employer, has used its market position—and significant resources—to its advantage, raising pay for more than a half-million workers and building a new corporate headquarters complete with amenities.

  • Walmart is struggling to find enough store managers, despite average pay for the role reaching $210,000 in 2021.
  • That’s led the retailer to launch a recruitment and training program aimed at enticing recent college graduates to join the company. Those accepted will receive a starting salary of at least $65,000 and be put on an accelerated two-year management track.
  • The retailer also recently boosted starting pay for long-haul truck drivers to up to $110,000 to juice recruitment efforts amid a nationwide driver shortage.

Restaurants slim down: With restaurants still struggling to attract employees despite higher pay and sign-on bonuses, they’ve had to revamp their operations to accommodate leaner teams.

  • Domino’s CFO Sandeep Reddy noted on the company’s Q1 earnings call that labor constraints forced store locations to reduce operating hours, restrict online orders, and not answer phones, leading to a decline in orders and same-store sales.
  • Employment in the food services sector is down 6.4% compared with pre-pandemic levels, per the National Restaurant Association, even as consumer spending in restaurants is rising.
  • That’s led restaurants to ramp up use of robots and automation and expand the use of takeout-only ghost kitchens to streamline service and meet demand.

On the flip side: But even as more restaurant chains embrace ghost kitchens, Reef Technology, which operates dark locations for Wendy’s and TGI Fridays, among other fast-food brands, is cutting 5% of its workforce.

  • Food delivery platform Gopuff laid off 3% of its global workforce in March in a bid to cut costs.
  • Thrasio, an Amazon aggregator, announced layoffs and leadership changes as it recalibrates to focus on more sustainable growth amid a broader slowdown in ecommerce.
  • Even Amazon, which like Walmart boosted pay and benefits aggressively to woo jobseekers, is now experiencing overstaffing in its warehouses, CFO Brian Olsavsky said.

The big takeaway: The labor market is a tale of two halves: With consumers rushing back to stores, retailers with a heavy brick-and-mortar presence have no choice but to raise wages and offer incentives to keep their stores staffed.

  • On the other hand, unprofitable tech startups that previously relied on a virtually unchecked flow of venture capital are now having to tighten their belts—and workforce—and show investors they have a path toward profitability.