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Holiday Labor Planning: Best Practices For Retailers Leveraging AI
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For Your Business Michael Spataro November 20, 2024

Holiday Labor Planning: Best Practices for Retailers Leveraging AI

With Black Friday falling at the very end of November, this year’s holiday shopping season will be unusually short, and retailers are already feeling the pressure. Facing aggressive sales goals and fierce competition, they can leave no box unchecked when it comes to preparation, especially as they make their seasonal staffing plans and manage the hiring process.

On the bright side, the shortened season gives retailers slightly more runway to get their labor strategies in order—but only slightly. After all, effective holiday labor planning entails far more than simply bumping up head count and updating last year’s job descriptions.

The technological landscape will also look different this year. Artificial intelligence has gained a firm foothold in the retail industry, both on the employee back end and the customer-facing side. In a survey of 50 retailers, McKinsey found that 64% had conducted pilots with generative AI (GenAI) to improve their internal value chains, and 82% had tested GenAI for customer service. Moreover, an Adobe survey found that 58% of customers think GenAI has improved their shopping experience.

Today’s retailers have various AI tools available to make their teams more efficient and productive than ever before. However, these tools also introduce new variables for labor planning, as their use could potentially affect how many employees are hired, when and for how long.

Here are some tips on how retailers planning to use AI can do so wisely to navigate their holiday labor hurdles and lay the groundwork for long-term success.

Seasonal Labor Optimization

Seasonal employees bring new schedule preferences and personal needs for employers to accommodate. For managers, these new scheduling parameters can be overwhelming, even more so if they’re using manual spreadsheets or paper methods to schedule their teams. Research shows that population encompasses more than a third (38%) of today’s managers.

Beyond the influx of new faces, the holiday season produces other unique labor challenges. Heightened demand is a major one. Researchers predict there will be a 3.5% increase in holiday sales this year, and in the U.S., consumer confidence is rising, which could also signal an appetite for spending. This means it’s crucial to ensure shifts are adequately staffed.

On the demand front, retailers can consider using AI to process information from key demand influencers, such as weather and traffic disturbances. AI learns continuously, so forecasts can become more accurate and business-specific over time. Precise demand forecasts are also integral to automated scheduling. Some retailers use AI to generate schedules that automatically account for employee preferences, expected demand and additional staffing needs, such as scheduling someone skilled in back stock and inventory management on delivery days. 

However, retailers must be careful with these tools. “Put good in, put good out” certainly applies to using AI to forecast demand. If the algorithm is training on bad data or not retraining frequently enough, it can skew labor plans in costly ways. Managers should always have the ability to make changes manually.

Retailers should also empower seasonal employees to express their schedule preferences and work extra shifts at will. For my company’s aforementioned research, we asked hourly workers what they wanted most in a new employment opportunity, and the flexibility to pick up extra shifts and swap shifts was the No. 1 option. There will certainly be days when a full team is needed, but the more autonomy employees have over their workplace experience, the more engaged—and productive—they’ll be.

Workforce Management As Ongoing Labor Planning

Labor optimization during the holidays, or any time of the year, requires more than just the right technology to drive business success. A company’s overall labor strategy can make or break the value of the tools they’re using.

The labor planning process shouldn’t be siloed. Instead, retailers should see the whole of workforce management as an ongoing labor planning activity. Key workforce management pillars, such as schedule management, employee communications, payroll and wage access, all impact overall labor efficiency and, in many cases, one another.

This is because labor planning directly informs the employee experience. Understaffed jobs can wear employees thin and drive up stress levels while depressing productivity. Overstaffing not only burns through payroll but can also leave workers bored and disengaged. Retailers cannot afford these negative impacts during the busiest time of year.

While AI can equip retail managers with insights to help guide business decision-making, it can only do so if the tools are accessible to them. Retailers need to prioritize training managers on how to use their AI-powered tools to extract actionable insights from the various sources of data available, from demand trends to productivity levels. When managers know how to use the tools provided, they can better help their teams face the unique challenges of the holiday season to finish the year strong.

Converting Holiday Readiness into Year-Round Success

A strong labor strategy during the holiday season can translate into improved operational efficiency into the next year and beyond. As organizations test what works and what doesn’t, the insights gleaned can inform future strategy and enable greater flexibility in the workplace year-round.

Creating a good experience for seasonal employees could also encourage some of them to stay on as full-time staff, labor budget permitting. Snagging a great employee to power success during the holiday season can feel like a gift. And when they stay on board, it’s a gift that keeps on giving.

For retailers, the holidays are a busy time rife with change. But every opportunity to change is an opportunity to grow, and those retailers that use their technology strategically can set themselves up for success in the future.

 

This article was written by Michael Spataro from Forbes and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to legal@industrydive.com.

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