The retail industry is entering a new era where competitive advantage is driven not only by sales performance but also by the ability to manage the workforce effectively. Amid rising labor costs, ongoing talent shortages, and the rapid advancement of AI, retailers are rethinking how they recruit, retain, and develop employees. Based on the UKG 2025 Retail Workforce Report, this article highlights nine key trends that will help retail businesses strengthen their workforce strategies and improve operational performance in the years ahead.

1. Retailers Are Shifting Their Focus from Hiring to Workforce Productivity

Rather than continuously expanding their workforce, retailers are increasingly focused on maximizing the productivity of their existing employees. Rising labor costs, employee turnover, and economic uncertainty have made workforce management a critical driver of sustainable business growth.

According to UKG, this shift is becoming increasingly evident:

• 85% of retailers report that labor costs continue to increase year over year.
• 71% identify improving store operational efficiency as their top priority for the coming year.
• 86% believe AI is improving workforce productivity, while also recognizing there is still significant potential to leverage technology in workforce management.

For retail businesses, this means that investing in technology, automation, and workforce management capabilities is becoming more important than simply increasing headcount.

2. Peak Holiday Seasons Remain the Greatest Workforce Challenge

The year-end holiday shopping season continues to present significant revenue opportunities, but it also places tremendous pressure on the workforce. As customer demand rises rapidly, staffing shortages can directly impact service quality and the overall customer experience.

The survey found that:

To prepare for peak seasons:

• 22% of businesses begin seasonal hiring in August or earlier.
• 77% are concerned about their ability to recruit enough employees for the holiday season.
• 81% implement cross-training programs so employees can perform multiple roles when needed.

These findings indicate that many retailers are shifting away from seasonal hiring toward building a more flexible workforce capable of responding to changing business demands.

3. Workforce Shortages Are Directly Impacting Customer Experience

Workforce shortages are not only placing greater pressure on HR teams but are also directly affecting operational performance and customer satisfaction.

According to the survey:

• 84% of businesses say staffing shortages make it difficult to meet customer expectations.
• 78% have struggled to recruit enough employees within the past 60 days.
• 24% report that customers are not adequately served on a daily or weekly basis due to insufficient staffing.

The consequences are becoming increasingly apparent. Customers experience longer wait times, service speed declines, and store managers spend more time handling day-to-day operations instead of focusing on strategic business initiatives.

These findings demonstrate that workforce management is no longer solely an HR responsibility. It has become a critical business function that directly influences customer experience and overall business performance.

4. Year-Round Hiring Is Emerging as the New Workforce Strategy

The way retailers respond to staffing shortages reveals a broader challenge: workforce gaps are often not being solved at the root cause but instead are being temporarily addressed by placing additional pressure on existing employees.

When a shift is understaffed, the consequences extend far beyond longer customer wait times. It creates a chain reaction across store operations—from managers stepping away from administrative responsibilities to work on the sales floor, to employees taking on additional shifts. These are early warning signs of manager burnout, as store leaders are expected to maintain operations while simultaneously filling frontline staffing gaps.

When faced with staffing shortages, retailers reported:

• 38% of customers wait longer to receive assistance.
• 36% experience longer checkout times.
• 32% of store managers work directly on the sales floor.
• 31% of managers take on additional shifts—an early indicator of leadership burnout.
• 29% increase their reliance on temporary workers.
• 29% ask or encourage existing employees to work overtime.

The most common responses—increasing dependence on temporary workers and requiring existing employees to work overtime—suggest that many retailers still view labor shortages as a short-term issue requiring temporary solutions, rather than recognizing them as the result of an outdated seasonal hiring model. In fact, 76% of retailers hire contract employees throughout the year when needed. This raises an important question: Does the continued reliance on temporary labor indicate that the core workforce model lacks flexibility?

The answer may lie within the existing workforce itself. By empowering hourly employees to proactively pick up additional shifts—rather than relying solely on manager-assigned schedules—retailers can fill many staffing gaps internally, reducing dependence on temporary workers whose quality and costs are often more difficult to manage. This is not simply an operational challenge; it is an opportunity to redesign workforce scheduling with greater flexibility. The growing shift toward year-round hiring suggests that this approach is becoming a strategic necessity rather than an optional workforce practice.

5. Employee Retention Is Becoming a Higher Priority Than Hiring

As recruitment becomes increasingly challenging, employee retention has become a top strategic priority. This is especially true for frontline employees, who play a critical role in shaping the customer experience.

Key findings include:

• Frontline employee retention rates range from 46% to 60%.
• Store manager retention rates range from 61% to 75%.
• 29% of retail employees in the United States are actively seeking new job opportunities.

To improve employee retention, businesses are prioritizing:

• 51% focus on offering more flexible work schedules.
• 24% invest in career development opportunities.
• Only 23% believe employees are no longer interested in working in retail—a significant decrease compared to the previous year.

These findings indicate that workplace flexibility and career development opportunities have become just as important as compensation in attracting and retaining talent.

6. Retail Employees Increasingly Value Mental Well-Being and Workplace Flexibility

Workforce shortages not only affect business performance but also place additional pressure on existing employees. The report suggests that many retailers continue to underestimate employee burnout, despite it being one of the leading causes of turnover.

Key findings include:

• 86% of retailers acknowledge that employees want more flexible work schedules.
• Only 18% of businesses consider burnout to be a major challenge.
• Meanwhile, 79% of frontline employees report having experienced burnout at work.
• One in three store managers observe signs of employee burnout at least once a week.

To improve the employee experience, many retailers have introduced more flexible workforce models, including:

• Allowing employees to work across multiple locations.
• Enabling employees to perform multiple job roles.
• Implementing compressed workweeks.
• Expanding part-time work options while maintaining employee benefits.

These findings suggest that compensation is no longer the sole factor influencing talent attraction and retention. As employees place greater value on work-life balance, retailers need to provide flexible scheduling, create career development opportunities, and enhance the overall employee experience to build a stable workforce.

7. AI Is Driving Workforce Productivity, but Perception Gaps Remain

AI is no longer an experimental technology—it is becoming an integral part of retail operations. However, a noticeable gap still exists between employers’ expectations and employees’ perceptions of AI.

Key findings include:

• 88% of retailers believe AI has a positive impact on their business.
• 80% report that frontline employees are already using AI in their daily work.
• However, 63% of employees remain concerned that AI could replace their jobs.

In practice, AI is being used to:

• Support recruitment.
• Streamline employee onboarding.
• Automate workforce scheduling.
• Forecast staffing requirements.
• Monitor employee performance.
• Analyze operational data.

By 2026, 37% of businesses plan to further invest in AI to improve workforce productivity, while 83% identify technology as their most important investment for enhancing operational efficiency.

8. Rising Labor Costs Continue to Challenge Retail Businesses

Increasing labor costs remain one of the most significant challenges facing the retail industry.

According to the survey:

• 85% of businesses report that labor costs continue to increase year after year.
• 77% are concerned that economic conditions and policy changes will impact their workforce planning in the coming year.

To maintain profitability, retailers are prioritizing:

• Optimizing pricing strategies and store performance.
• Controlling operational costs.
• Investing in the employee experience to improve retention.
• Leveraging technology to increase productivity rather than relying solely on workforce reductions.

Rising labor costs are prompting retailers to shift their focus from reducing headcount to maximizing the productivity of their existing workforce. As a result, AI and workforce management platforms will play an increasingly important role in improving productivity, controlling costs, and maintaining long-term competitiveness.

9. Future Trends in Retail Workforce Management

The findings from the report indicate that the retail industry is transitioning from traditional HR management to data-driven, technology-enabled workforce management.

Key priorities include:

Rather than simply hiring more employees, retailers are increasingly focusing on building a flexible workforce, improving the employee experience, and leveraging AI to optimize operational performance.

Conclusion

The UKG 2025 Retail Workforce Report shows that the retail industry’s greatest challenge is no longer hiring more employees—it is managing the workforce more effectively.

As labor costs continue to rise, AI adoption accelerates, and employee expectations evolve, businesses need to invest in HR management platforms that can digitize workforce data, optimize scheduling, automate HR processes, and provide real-time insights to support better decision-making.

This is why modern HR management solutions such as SunFish are becoming increasingly essential for retail businesses. By enabling organizations to improve workforce productivity, enhance the employee experience, and optimize workforce operations, SunFish HR helps retailers build a sustainable competitive advantage for the long term.