£3bn by 2020
The impact on retail of the National Living Wage
The National Living Wage in the UK came into effect today, Friday 1st April. Much has been said and written about the impact this will have on industries who traditionally employ large numbers of low paid workers. So what is it and what impact is it likely to have on retail?
The National Living Wage or NLW is a new national minimum wage of £7.20 per hour for everyone aged 25 and over. The rate is 50p higher than the previous minimum wage of £6.70 – although that lower rate will still apply for those aged 21 to 25. And between 1st April 2016 and 2020 the rate is set to increase to £9 per hour.
Retail and hospitality account for approximately half the number of workers on the lowest pay, meaning that as of 1st April some 300,000 retail workers received a pay increase. Some estimates put the total cost to retail in the region of £3bn per annum by 2020.
So what can we expect as a result of all this?
Price rises are the first and foremost obvious area however as we know retail is extremely competitive and the reality might be that retailers will only be able to mitigate the impact marginally through price. Added value services such as home delivery and click & collect will be targets for charging where before this may have only existed for certain basket sizes.
The real threat however will be to jobs and stores where the impact of the increase in costs will force retailers to rethink their staffing levels and store estates. This you may think is nothing new however, coupled with the emergence of smartshoppers (mobile, digital, smartphone savvy consumers) retail is set to continue its rapidly ever changing landscape. NLW will only help to accelerate this. So what of new technology and how will retailers use this to help offset this increase in costs?
Consumers can expect more self-service and self-scanning technology to be used as retailers try to reduce staff hours. According to the Centre for Retail Research, a lot of new technology will also be applied to warehouse operations. However, this is also a very good time to be in the business of workforce management. As the full impact begins to bite, retailers will start to take a different approach to their workforce from being the largest (almost) fixed cost to one where they are seen as an asset. Productivity will again be the byword and across store estates, in parallel with the role of the store morphing in response to the rise of (typically) mobile online shopping, staffing levels will come under scrutiny whereby having the right staff, with the right skills, at the right time & in the right place will be of paramount importance.
How much of this change would happen regardless of the introduction of the NLW is open to debate but what is clear is that the NLW will at the very least accelerate it, if not have a strong influence on priorities over the coming years.
Andrew Busby is Retail Business Head at Zensar Technologies