Happier Employees Point to Happier Bottom Lines 

Survey finds improving employee satisfaction at many retailers

Author: Andria Cheng

March 3, 2017

If, as studies have shown, happy retail employees ultimately make for happier bottom lines, then a new study is a hopeful sign for big retailers that their results will be under less pressure in the future.

A UBS Evidence Lab study of more than 150,000 employee satisfaction reviews from job review site Glassdoor found that overall satisfaction levels at Walmart, Target and other big retailers reached new highs.

In fact, among the hardlines retailers in the UBS study, Walmart scored the biggest gain in employee satisfaction with their compensation.

A key to employee satisfaction, of course, is compensation. A variety of retailers, Walmart and Target among them, have lifted wages over the past two years.

"With retailers already facing secularly declining brick and mortar traffic, employee satisfaction is becoming an even more important weapon to stabilize economic models at physical stores."

“This suggests that the wage increase at these two retailers are driving an improvement in employee morale,” UBS analysts said in a joint report. “We think there’s a link between companies receiving high employee satisfaction scores and companies that have built reputations for superior customer service. With retailers already facing secularly declining brick and mortar traffic, employee satisfaction is becoming an even more important weapon to stabilize economic models at physical stores.”

To be sure, Walmart, McDonald’s and other retailers’ wage hikes came in part after years of protests by labor rights advocates who argued that these companies’ store employees aren’t making living wages. Despite the hikes, advocates have argued minimum wages at many retailers still fall short.

Photo credit: Walmart

And despite the recent wage increases, workers at retailers and restaurants are still routinely among the lowest paid in the U.S., according to Bureau of Labor Statistics data. Meanwhile, Walmart and other retailers’ profits have been hurt by the costs of the wage hikes, which Walmart has estimated at $2.7 billion for a two-year program.

The sector also is contending with many bigger-picture issues, including consumers increasingly buying online and shifting more of their spending to experiences over nonessential things.

As wages rise, UBS analysts said winning companies will be the ones that can leverage the short-term lift of employee satisfaction to design long-term strategies that can lead to more engaged sales staff and therefore reduce turnover, training and other costs. “Failing to do so could be even more disruptive to the already-fragile in-store consumer experience,” they said.

The study found that companies with “well-known, strong employee culture,” including warehouse membership club chain Costco, athletic-gear retailer Lululemon, and coffee-house giant Starbucks, were consistently top ranked in employee satisfaction.

Interestingly, Nordstrom, consistently ranked among the top in terms of customer service, was among the few apparel retailers in UBS’s study that saw a decline in employee satisfaction. As the luxury department store chain’s comparable sales declined at its full-priced stores, that may have hurt employee morale as its employees there are paid on commission that fluctuate with sales, according to the report.