Executive Summary
This paper explores the rationale behind massive job cuts in the retail industry, primarily focusing on supermarkets. The research embraced a literature review of popular and scholarly sources. The research findings include some main challenges that lead to significant supermarket layoffs, including cost pressure and financial challenges, changing consumer behaviors, and technological advancements. The research also relates to the case of Sainsbury Supermarket layoffs. However, it holds that Sainsbury’s main reason for the layoffs included cost-cutting purposes. The researcher recommends that human resource management should have a portion of the employees in essential roles working as permanent employees and enter into casual contracts with another percentage, a situation that can reduce the tendencies of recruiting and laying off employees with industrial changes.
Keywords: Retail industry, Supermarkets, Massive job cut Layoffs, Cost pressure, Financial challenges, Changing consumer behaviors, Technological advancements, Sainsbury Supermarket
Introduction
On February 29, 2024, Sainsbury decided to lay off 1,500 employees, a strategy it planned to save the supermarket chain £1 billion a year (Wearden, 2024, par. 1). Supermarket chains operate in the retail business, selling both luxury and basic needs solving goods. As a result, the demand for goods shifts occasionally. The market is highly dependent on the economic status of any jurisdiction. Other factors that affect or influence the demand or supply of human resources other than cost-cutting include changes in technology and the advancement of robotics, among others (Workers Union, 2024, para 10). Exploring the factors that influence layoffs in supermarkets and supermarket chains is essential as it can recommend a course of action for human resource planning. Cost pressure and financial challenges, changing consumer behaviors, and technological advancements are some factors that lead to layoffs in supermarkets and applied in the recent Sunbury chain layoff plan case.
Findings
Cost Pressures and Financial Challenges
Inflation is one of the factors that drive decisions such as cost-cutting. These decisions include the management of labor, where human resource management has to ensure that the efficiency of employees is high in terms of productivity. It also leads to flexible work arrangements and the need for training and upskilling. It also leads to considerations of layoff options such as furloughs, which reduce work hours and retain talent. In worst-case scenarios, layoffs are inevitable, but organizations must consider offering severance packages (Simon & Echter, 2022, p. 119). Companies usually decide to lay off non-essential personnel during economic downturns. In other cases, industry declines also lead to layoffs (Mujtaba & Senathip, 2020, p. 222).
Factors that hurt the supply chain process also contribute to layoffs. COVID-19, for instance, disrupted the supply chain for most organizations, as they had to change their operations models, break too many interactions with stakeholders, and minimize costs while trying to optimize revenues in the challenging environment. These supply chain disruptions directly impact layoffs, where most employees work from home, while others become irrelevant in new supply chain approaches (Kumar et al., 2021, p. 317). In other cases, companies may decide to lay employees off to cut the cost of production and embrace outsourcing, where they only hire employees on demand (Mujtaba & Senathip, 2020, p. 211).
Changing Consumer Behavior and Demand
Changes in consumer behavior also lead to increased cases of layoffs. According to Holman’s New York Times article, during the COVID-19 pandemic, there were sharp changes in consumer behaviors, which led to employee layoffs. The first changes include a change of focus from spending on luxury goods to basic-needs-solving goods (Holman, 2023, par. 20). The trend implied lower revenues to retail stores that made more sales from luxury goods. Thus, there was a need to cut costs: Layoffs were one option for these companies. In retail stores that experienced higher demand for goods due to the pandemic and pressure dealing with long queues of customers, there was an increased tendency to hire new employees to meet the demand during the pandemic (Holman, 2023, par. 17). However, when the panic reduced. The market normalized, and these stores also had to lay off some of the excess employees hired during a time of high demand for human resources.
Consumers also changed their shopping strategies from a predominantly physical-store-visiting shopping model to omnichannel shopping. The omnichannel shopping included the use of both online and offline shopping models. Online retail rose to cater to the lockdown, lowering the demand for workers in the retail industry (Holman, 2023, par. 25). Most of the traditional physical workers may lose their jobs due to these changes in consumer behavior, while the organization might need to hire a new caliber of workers with different sets of skills such as software developers and modern supply chain models running skills. The changing consumer behavior influences layoffs as it is sharply changing from traditional retail stores to modern e-commerce-based and omnichannel commerce strategies (Holman, 2023, par. 13).
Technological Advancements and Automation
The supermarket industry is a sector that has embraced technological developments that have primarily affected staffing needs and further led to substantial job losses. One of the significant developments is the proliferation of self-checkout systems that help customers scan and further make payments for items they take without operators’ assistance. Despite the improvement in the efficiency of these kiosks, there has been a reduced workforce required in the supermarkets. In addition, automation has also resulted in the transformation of the backend operations, such as managing inventories and logistics of the supply chain (Harris et al., 2022, para 4). Using sophisticated software helps analyze data, optimize product orders, and minimize overstocking. Automated warehouses and distribution centers leverage robotics and artificial intelligence to coordinate the movement of goods with minimal human intervention (Workers Union, 2024, para 10).
In addition, the rise of online grocery ordering and delivery services has further reduced store staff roles. The strategy only requires personal shoppers who select and pack online orders. Therefore, the store only needs fewer traditional cashiers, baggers, and customer service staff to manage the brick-and-mortar effectively. With the developments in e-commerce, shopper jobs are on the verge of downfall due to the growth of centralized fulfillment centers (Harris et al., 2022, para 6). Although technology tends to boost productivity and further reduce costs, it has dramatically shaped the workforce and reduced supermarket staff.
Case Study: Sainsbury’s Job Cuts
Sainsbury, in 2024, announced a massive layoff of employees, which affected over 1500 employees across the network of its operations. The mass layoff affected approximately 5 % of the total workforce. The layoff is due to the £500 million saving plan to simplify operations. The move affected specific roles, such as the staffers at the deli counters, meat section, bakeries, and traditional cashiers at the checkout. The management pointed out that the layoff was due to the profound changes in how their customers shopped, with most consumers opting for the grab-and-go option compared to the full-service counters and checkout. In addition, adopting self-scanning technologies further reduced the staff required at the checkout (Workers Union, 2024, para. 7).
To implement the transition with minimal disruptions, Sainsbury focused on the reductions by looking into voluntary redundancies and providing early retirements rather than engaging in outright layoffs. However, even with the move, many employees experienced involuntary job loss at the supermarket chain, leading to a decline in efficiency and a shift in consumer preferences. The strategy was also adopted by other UK grocery stores, such as Tesco, which led to inflation and competition from the discount chains (Workers Union, 2024, para 10). It further pointed to the tremendous upheave confronting the legacy supermarket players, with many companies struggling to remain profitable and relevant in the evolving landscape.
Conclusion
The findings from this research indicated that cost pressure and financial challenges, changing consumer behaviors, and technological advancements are some factors that lead to layoffs in supermarkets and applied in the recent case of the Sunbury chain layoff plan. Supermarket chains face cost pressure, which stems from different issues such as inflation and other occurrences that lead to financial challenges. Consumer behaviors also continue to change, shifting the model supermarket stores use to serve them, affecting human resource practices. Technological advancements, especially in automation, continuously replace many human operators. These factors, whether directly or indirectly, affected the Sainsbury supermarket chain, which recently planned and executed a significant layoff plan. Human resource management should consider having a portion of the employees in essential roles working as permanent employees and entering into casual contracts with another percentage, a situation that can reduce the tendencies of recruiting and laying off employees with industrial changes.
References List
Harris, T., Kuzmanovic, A. and Pandrangi, J. 2022. Tech-enabled grocery stores: Lower costs, Better Experience, McKinsey & Company. Available at: https://www.mckinsey.com/industries/retail/our-insights/tech-enabled-grocery-stores-lower-costs-better-experience (Accessed: 26 April 2024).
Holman, J. 2023. With Layoffs, Retailers Aim to Be Safe Rather Than Sorry (Again). The New York Times. [online] 26 Jan. Available at: https://www.nytimes.com/2023/01/26/business/retail-jobs-layoffs.html [Accessed 27 Jan. 2023].
Kumar, P.S., Chowdhury, P., Abdul M., & Hung, L. K. 2021. Supply Chain Recovery Challenges in the Wake of COVID-19 Pandemic. Journal of Business Research, [online] 136(1), 316–329. doi https://doi.org/10.1016/j.jbusres.2021.07.056.
Mujtaba, B.G. & Senathip, T. 2020. Layoffs and Downsizing Implications for the Leadership Role of Human Resources. Journal of Service Science and Management, [online] 13(02), 209–228. doi:https://doi.org/10.4236/jssm.2020.132014.
Simon, H. and Echter, A. 2022. Reduce Costs. Springer eBooks, pp.119–127. doi https://doi.org/10.1007/978-3-031-20093-9_14.
Union, W. 2024. Sainsbury’s announces significant job cuts as part of cost-cutting strategy, The Workers Union. Available at: https://www.theworkersunion.com/2024/03/01/sainsburys-announces-major-job-cuts-as-part-of-cost-cutting-strategy/ (Accessed: 26 April 2024).
Wearden, G. 2024. Sainsbury’s to cut 1,500 jobs; The Body Shop to shut 75 more shops – as it happened. The Guardian. [online] 29 Feb. Available at: https://www.theguardian.com/business/live/2024/feb/29/bitcoin-rises-towards-record-high-sec-openai-uk-mortgages-us-pce-inflation-business-live [Accessed 1 Apr. 2024].
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