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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 ( 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.)

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?

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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