You may have taken note recently of the flood of advertising seeking seasonal labor for the upcoming 2016 holiday shopping season. Amazon, UPS, Fedex and many other national retailers and distributors have recently flooded national media outlets with ads seeking seasonal help. The increasing frequency of these ads and the significant investment being made to recruit seasonal workforce members gives evidence of the increasing challenges companies are experiencing in meeting seasonal labor demand needs. This trend should not be ignored and leads to the broader conundrum that business leaders need to carefully evaluate …. Could the lack of sufficient seasonal labor become a choke-hold that derails the future of eCommerce growth in the USA?
In our strategic visioning conferences (www.strategic-visioning.com), we teach our clients to table their biases and assumptions that are most often centered around a view of times past, and become “futurists” by objectively assessing research resources and the growing universe of Big Data that gives them a vision of the future. Long tail successful businesses must encourage a culture that includes “visioning the future”. Investing in and developing internal talent that can identify and intellectually debate various probable future outcomes from big data and other resources and then assimilate theories as to how those outcomes might impact or provide opportunity for the company itself, is a critical cultural skill set that the next generation of successful companies must actively cultivate. This article will allow you to experience a glimpse of being a futurist as it leads you through a mini version of the structured “visioning” sessions that we facilitate for client companies.
Outlined below are 3 “futuristic visioning” points of discussion, with supporting data, that allow us to intellectually debate the question … Could the lack of sufficient seasonal labor become a choke-hold that derails the future for eCommerce growth in the USA?
- eCommerce requires more labor “touch” than traditional retail commerce – Recently I completed research that shows that a direct to consumer (D2C) eCommerce transaction can require as much as 4 times more labor than that of a traditional brick and mortar retail transaction for the same item. How can this be you might ask? There are many complex factors at play, but simply stated, the D2C eCommerce model actually goes against the grain of “economies of scale” in terms of manpower requirement. Because shipment sizes from the distribution center are smaller and individual units are touched multiple times more through the supply chain at various distribution and carrier sort/delivery facilities, the research showed that the total manpower required is between 1.1 and 1.6 additional minutes of labor per unit versus the traditional brick and mortar retail model.
- Demand for eCommerce seasonal labor could materially outpace the labor supply – Various sources project US eCommerce holiday season sales (the period of Nov 1 to Dec 31) will grow by close to $50 billion by 2018, from around $100B in 2015 to nearly $150B in 2018. In my research, I built several models that project the additional seasonal labor requirements to handle $50B of D2C eCommerce and the results are stunning. The results indicate that firms could be seeking between 125,000 to 200,000 ADDITIONAL seasonal workers to support the 2018 eCommerce volume projections. (As a comparative data point, the entire US economy only added 161,000 jobs in October of 2016.) If current low unemployment rates continue (currently at 4.9%), I believe it becomes increasingly difficult, arguably impossible, for companies to construct any viable plan to meet the hiring demands for seasonal workers. This phenomenon in the next year or two could place a choke-hold on eCommerce growth as companies are unable to find labor to move the projected increases in volume. Further, one can reasonably expect quality metrics will suffer as well, increasing total costs and souring consumer satisfaction.
- Wages for seasonal labor are likely to increase substantially – Data already shows us that hourly wages for seasonal workers over the past 3 years has increased by $2-3 per hour. As such, it is only logical to conclude that if the demand for seasonal labor continues to outpace available supply, wages will continue to increase as companies fiercely compete for the scarce seasonal labor resource. The increase in this labor cost component will create a reason for pause as companies question higher cost resource investments in their eCommerce business channel, potentially resulting in another choke point in eCommerce growth.
There are endless other data points (e.g. check out the shortage of long haul truckers) that can be formed into additional “futuristic visioning” points of discussion such as the 3 outlined above. But given our short venue here, let’s now shift this visioning debate and discussion around this seasonal labor topic towards 2 “futuristic actions” that can be taken to open the door of opportunity for companies.
- Awaken the “dormant” workforce by embracing their values – US Department of Labor statistics identify that there are 92 million Americans who are dormant or “non-working”. These individuals are not considered in the Department of Labor unemployment statistics because “they are not actively seeking work”. A large majority of this group is made up of either retired persons or students and those who have chosen to stay home to raise children or care for other family members. Another interesting angle to consider in this dormant workforce is the “Gig or You Economy” trend. You and I know this group as those working with the likes of Uber, Task Rabbit and other fractional/self-employment opportunities. Recently the Department of Labor acknowledged the difficulty in statistically tracking individuals they labeled as having “contingent work arrangements”. As such, this group is likely included dormant workforce category as well.
Huge opportunity to connect with additional seasonal workforce candidates may exist for companies who can successfully engage with these “dormant” workforce members. While higher wages are one obvious method, more imaginative and sustainable incentives could lie in how jobs and work environments are structured to provide a high appeal that awakens the dormant workforce. Companies need to consider elements like low cost child care alternatives, self-determined work schedules and policies and work task designs that diminish age driven limitations on your labor force. Companies that invest in creative technology solutions (e.g. Uber) and embrace disruptive organizational structure redesign could catapult themselves into a strong and competitively advanced position by engaging this “dormant” workforce.
- Redesign retail supply chains to create efficient alternative product delivery options – On the top of almost all consumer surveys about eCommerce shopping we find a point that relates to “better product selection” as a primary reason why consumers choose to shop online. With brick and mortar retail locations diminishing like snow in spring, and the remaining retail footprints getting smaller, there is an argument that better product selection online is becoming a self-fulfilling prophecy. Given our future points of discussion herein, I believe a viable solution is a redesigned supply chain that provides a more optimal balance of channel choice by consumers between brick and mortar retail and the D2C eCommerce shipping model. For example, retailers continue to lag in their investment in technology and supply chain design that embraces convenient alternative options to obtain product (the “omni-channel”), such as in-store pick up and store to consumer shipping. Too often consumers find cumbersome processes and technology, unreliable in-store inventory balances, poor in-store product selection and availability, and brick and mortar retail facilities that are not efficiently designed to service alternative eCommerce delivery models. There is a key role for brick and mortar retail locations to play in the shopping solutions of the future. Companies must vision an entirely different retail facility that is designed to provide an efficient solution to the shopping requirements of the future while also investing in the underlying technologies necessary to provide a convenient top-shelf experience for the consumer.
I wish you all a very happy holiday shopping season and I welcome your comments and additional thoughts on this subject.
About the author – Mr. Mark C. Layton is a Strategic Visionary, Management Consultant and entertaining speaker based in Dallas, TX. He serves his clients as a strategy consultant & facilitator, board member and trusted adviser. In a professional career spanning over 30 years, Mr. Layton is recognized as a highly successful entrepreneur, executive leader, supply chain expert, eCommerce pioneer and an innovator of digital, web and mobile commerce technologies and services. Layton founded one of the first ever internet focused supply chain firms, PFSweb Inc. in 1992 and lead that firm as its CEO for over 20 years. Mr. Layton is a faculty member at the University of Texas at Dallas and at Texas Christian University. To book Mr. Layton’s as a speaker, facilitator or management consultant, please contact him at firstname.lastname@example.org .
Sited Sources: Internet Retailer, eMarketer, Forrester, US Department of Labor, The Wall Street Journal, Yahoo! News