Page 110 - DMGT551_RETAIL_BUSINESS_ENVIRONMENT

Unit 5: Managing Retailing in Good Times and Bad

According to National Retail Federation research, retail and food and drinking places employ Notes
more workers than all other sectors of the U.S. economy. With one in five workers occupying a
job in this sector, the impacts of a retail recession on employment will be significant. During the
recent boom in consumer spending, the retail sector added hundreds of thousands of jobs. Data
from the BEA and BLS from 1980-2003 illustrates that retail employment exhibited average
annual growth of more than 1% despite two recessions and one downturn. The fastest year to
year growth occurred in the 1980s following the recession lasting from 1980-1982 with average
annual growth in retail employment gaining 4% between 1983-1985. During the recessions
beginning in 1980, 1990 and the slowdown in 2001 the retail industry saw declines in employment.
The average annual employment declined during these events at .8%.
BEA data indicates that Iowa’s retail sector employment followed national trends over the long
run but has deviated in the timing of adjustments. During the recession 2001-2003 retail
employment declined nationally as well as in Iowa. Prior to 2001, Iowa employed a larger
percentage of its 2001 retail labor force than the nation did and following the recession, Iowa
reemployed its retail labor force at a lower rate than the nation did. Iowa’s retail employment
began declining in 2007 while the nation’s retail employment was still increasing indicating
Iowa’s adjustment to the recession might be more gradual.

The data illustrates that retail employment responds quickly to economic conditions, and cautions
that the individual retailer is currently facing difficult decisions with respect to levels of
employment and overall labor costs. With input costs rising and structural rigidities affecting a
retailer’s ability to maximize revenue, labor becomes an avenue for retailers to reduce costs.
Some options businesses use to avoid laying off employees is reducing hours from full to part
time, using less employees per shift, and reducing store hours. None of these are desirable
solutions as employees are often family in smaller retail establishments and reducing hours
makes it more difficult to compete with discounters. Another option retail businesses often
revert to is becoming a non-employee establishment to weather these downturns. Again, the
decline in retail employment has ripple effects throughout the economy and forces the individual
retailer to make tough decisions to survive.
Figure 5.1: Retail Employment Indexed to 2001 Levels

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

5.5 Maintaining the Balance in the Economy

Tips for Consumers and Retail Shoppers

1. Now is a good time to be a consumer. You might have less money to spend but retailers
want your money more than any time in recent history. Take some time to shop around
for the best prices, environment and service.
2. Your dollar is your vote. If you really enjoy shopping at a local retail store don’t expect it
will be waiting for you to come back if you switch your shopping habits. Choose where

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