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Higher Wages Could Be Grocers’ Best Investment

Higher Wages Could Be Grocers’ Best Investment

Riding in a New York City subway train last week, I noticed an advertisement for, a pet supply site — one more sign of the apocalypse for brick-and-mortar retailers.

Online category killers, along with perhaps the greatest emerging threat of all —, as it contemplates expanded markets for its AmazonFresh service as well as same-day delivery — give consumers a price incentive not to come to physical grocery stores.

Food retailers’ usual answer to this issue — and to the perennial threat posed by low-price operators like Wal-Mart Stores — is to double down on cost-cutting in order to keep their own prices low. And this is one reason why wages paid to retail workers are so depressed that the typical retail salesperson earns $21,000 per year, with cashiers making $18,500 on average, according to New York-based Demos.

But one retail executive I spoke to suggested that this approach to salaries may need to be revisited, especially in light of research by Demos ( [3]) as well as by MIT professor Zeynep Ton and Wharton professor Marshall Fisher, among others, who make the argument that higher retail salaries would not only benefit retail workers, but give a much-needed jolt to the economy and ultimately reward retailers themselves. (See the story here. [4])

The idea is that retailers should invest in their employees in order to improve their productivity and customer service, and to reduce turnover. A more engaged and stable workforce represents an advantage that can’t be duplicated online. “Retailers who are concerned about different distribution channels — like Amazon — should be incredibly concerned about differentiating the brick-and-mortar experience from the commoditized experience,” the executive said.

SN Poll: How Do You Feel About Raising Wages to Boost Profits? [5]

In supermarkets, efficient and friendly cashiers help shoppers get through the checkout lines faster. But New Yorker writer James Surowiecki pointed out another key customer-service value in an article published last year — the reduction of “phantom stock-outs,” or products that are on the shelves but can’t be found by shoppers. “Worker-friendly retailers with more employees have fewer phantom stock-outs, which leads to more sales,” he wrote.

So it turns out that, paying employees more – apart from significant societal benefits — actually can make good long-term business sense. I encourage retailers to take a close look at the research on this issue.

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