CNBC reports on Home Depot's decision to invest $1 billion this year "to increase hourly wages for every one of its frontline workers," despite projections that its annual sales and profits will be flat this year. (Economic realities mean that people aren;'t spending as much money on home improvement products, plus many did all that work during the pandemic - there isn't as much to do these days.)
According to the story, "Giving pay raises at the same time sales are slumping seems like an incongruous strategy, but Home Depot executives project that it will actually boost the big-box retailer’s industry-leading position."
CFO Richard McPhail has been quoted as saying that the goal is to "continue to capture market share," by exploiting "“the unique advantage that our orange-blooded associates give us over our competition."
CNBC writes that the move is similar to those made by Walmart and Target:
"Although it’s difficult to draw a straight line from the cost of labor to sales, profits and market share - and retailers are also making big investments in automation - retaining a loyal and satisfied workforce can be seen as a wise strategy amid an ongoing battle for talent, and even as persistent inflation and interest rate hikes are expected to further moderate what has been robust consumer spending."
- KC's View:
Beyond the fact that this represents a philosophical point of view with which I agree, there's another point worth making - that Home Depot is hiring from essentially the same labor pool as virtually every other retailer. Home Depot seems to recognize that "orange-blooded associates" make the difference in the customer experience, and that it is critical to build compensation plans that reflect the fact that employees are an investment, not a cost.
Other retailers may not competing in the same segment, but they are competing for the same people. And they're going to have to measure up, or settle for second-best. Which may not be good enough.