What A Difference A Year Makes

While e-commerce operations and the vendor companies that support them keep an eye on their own bottom line, they’ve been able to cut back on the number and size of hiring bonuses, reduce soft perks like free lunch, ask existing employees to do more, and still get and keep staff. But that’s not to say that the dot-com falloff has made staffing and recruitment into a total buyer’s market for e-retailer employers. Even in these tougher times, employees have demands of their own. Many want compensation packages that are heavier on the certainty of base pay than on risky incentives like stock options. There’s more interest in working for established companies, the lure of start-ups having been tarnished by the failures of the past year.

The more technically focused jobholders and job-seekers flock to opportunities to work with the latest technology—in whatever industry sector. Some workers and job seekers are packing up their skills and leaving e-retail for other fields that can use their talents. That means that for certain tech-heavy functions needed to support retail web operations, employers may find themselves competing increasingly not with other retail operations, but with other industry sectors where the scale is higher across the board.

In fact, with the exception of a few job functions tracked in a Mercer 2001 e-commerce compensation survey, the retail and wholesale sector on average compensates e-commerce professionals at a lower rate across the board for the same job skills than do the industries that make up the aggregate average. And it’s considerably lower than the financial services industry, a top-paying industry sector tracked in the Mercer survey.

Only the top e-commerce executive average salary of $254,100 ranked higher in retail than the all-industry average, which was $236,400. But this was considerably lower than the average salary of the top e-commerce executive in the financial services industry, $277,000. Only in one job function did average salary in the retail sector top both the all-industry average and the financial services industry: at $136,100, e-commerce marketing directors make more in retail than their counterparts in all industries ($120,900) and in financial services ($134,500.) In all other job functions tracked year to year, with the exception of web content analysts, e-commerce professionals working in the retail sector made less on average in 2001 than both the all-industry average and the financial services sector. Mercer notes that as this is only the third year of the annual survey, which polled 135 e-commerce organizations across the country including 25 retailer/wholesalers, the sample population has yet to stabilize and the data have yet to prove trends.

Retail salaries haven’t really dipped despite the larger pool of workers in the job market, but employers with jobs to offer are filling them faster. “We see relatively short search times,” says Challenger president John Challenger. “In the second quarter of this year, it took an average 2.07 months to fill a job—normally, it’s about 3.2 months. We’ve seen searches stay under 2.5 months for the past nine months. Many people are getting picked up by companies out of the dot-com realm and going into the rest of the economy—and the rest of the economy is glad to get them.”

Similarly, at people3, Berry has seen a half-month drop in the length of time needed to fill IT positions across all industries, including retail, as the market has filled up with laid-off talent. “It’s gotten easier to fill jobs because there are more people available,” she says. Hiring bonuses haven’t dropped off the face of the earth, but the days of rewarding new recruits from top MBA programs with BMWs are gone. Hiring bonuses have ranged from $20,000 to $30,000 for top-level IT company executives, $5,000 to $10,000 for middle management, and $2,000 to $5,000 for individual contributors. “I haven’t seen those ranges change,” says Berry. “But they’re being used in recruiting much less frequently.”

According to Hewitt’s data, salary increases for workers with hot skills are higher than ever, averaging a 7.5% increase over the past year, versus an average 5% over the previous year. But now, employers are insisting on track records and demonstrated skill, demanding more in terms of professional experience from the newly hired before shelling out the big bucks. “It used to be that employers would take anyone with a pulse,” says Berry. “If you could spell Unix, you had a job. Now, candidates have to have more proven expertise. Employers are becoming more selective.”

Most of the tech skills that are most in demand have application in e-retail, including , for example, PeopleSoft application development and data warehousing skills. Step outside of IT hot skills, and the employment and compensation picture looks somewhat different for the rest of e-retail. “Last year, e-retailers took people who didn’t have specific experience. In marketing, for example, they would take people who were bright and creative from related fields, such as in-store marketing or marketing for consumer package goods. If they had good credentials, they gave them a shot,” says Eagan. “Because of the huge demand, a lot of people got into it without real experience.”

But now they have the experience and many of the e-retailers they were working for closed or got absorbed back into a parent, creating a bigger pool of qualified applicants looking for jobs. As a result, e-commerce jobs that are less technology-based aren’t the focus of so much competition among employers. Again, compensation hasn’t dropped in that arena so much as have the number of available jobs.

Recruitment firms have a backlog of candidates, because employers aren’t filling as many positions as they were only a year ago. Some recruiters who had made a specialty of filling e-retail jobs have exited that specialty entirely. Ebiz People Inc., for example, a Salt-Lake City recruiter affiliated with MRI, had at one time filled e-retail positions for RedEnvelope.com, Sephora.com and Amazon.com.

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Those with jobs are more inclined to hang onto them. Candidates have become much more wary about making job changes and less inclined to chase after riskier incentives associated with Internet start-ups. Until the end of last year, average turnover rate had been about 20%, with some jobs reaching 40% to 50%, says Berry. Now, it’s between 10% and 15%. “Only two years ago, people were jumping to dot-coms for the stock options. Now they’re looking for more stability,” she adds.

With competition still intense for hot-skilled IT workers, fewer resources for hiring new positions across the board, and even the best non-tech professionals more willing to swap higher but riskier reward prospects for a measure of security, no single recruitment, retention or compensation strategy can serve a retailer’s diverse staffing needs. But recruitment and HR experts from IT and retailing say the market itself offers guidance on tailored approaches to staffing and retaining different job functions needed within e-retail.

For IT workers, it’s more about the thrill of working on the leading edge. In fact, in People3’s most recent compensation study, three factors—the opportunity to work with the newest technologies, training initiatives, and a challenging technical environment—ranked higher than competitive, market-based salaries as effective employee retention practices. But as Hewitt’s data show, hot skills are drawing top compensation anyway.

E-retail job functions less directly IT-focused represent another situation. Though a retailer’s top e-commerce marketing director commands top dollar, he or she needs the support of a whole raft of other job functions to make the site successful — everything from e-commerce strategy director to marketing analysts to customer support mangers. Expertise in these positions is less easily transferable from e-retail to other industries, and professionals with the expertise have seen the e-retail job market contract. For many in this group, security and stability of employment become increasingly important. Employers who can rebalance more of the compensation package toward base compensation and predictable bonuses, and less toward riskier incentives will most likely have an edge.

At least, they will for now. As compensation experts like Bacon look into the future, they see other influences on the horizon that could change today’s employment dynamic. For instance, there’s the aging of the current workforce to consider. As the workforce matures, it needs cash today to fund today’s purchases, not just promises of potential IPO wealth in the future. “There will always be 23-year-olds around to staff start ups, but as the current crop of workers matures, I’d suspect they’ll want more traditional compensation packages,” he says. Which could mean that compensation in e-retail (and other industries) swings even further toward traditionally structured pay and incentives.

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It was slightly more than a year and a half ago that Best Buy went into high gear to prepare for the new web site it would launch a few months later in June 2000. As an e-retailer staffing up just as unsuccessful dot-coms were staffing down, BestBuy’s online subsidiary, Bestbuy.com, had no trouble attracting employees. In fact, director of resource management Curt Gray was surprised at how easy it was.

“Early on, we thought hiring would be more demanding than it was, so in the infancy of our organization, we just made sure we had a very competitive compensation package,” Gray says. In retrospect, additional factors beyond compensation helped Bestbuy.com to find the talent it needed quickly, factors that also have worked to the recent advantage of other e-retailers with jobs to fill.

For one thing, the pool of talent was simply larger than at the height of the dot-com frenzy, due to layoffs and downsizing at other companies. An attractive job location is another key factor: the company is headquartered in Eden Prairie, MN, a close-in suburb of the Twin Cities. Finally, Gray, believes, Best Buy’s established brand and presence as a clicks-and-mortar retailer rather than a pure-play gave it a hiring edge. “People looked at us and saw that there was a very stable mother ship behind the dot-com operation,” he says.

That’s not to say that staffing Bestbuy.com was all gravy. Like other e-commerce operations across industry sectors, Bestbuy.com had to compete to fill positions requiring specific IT expertise: in its particular case, those with the Java, Pearl, and XML language skills critical to its AGT platform.

Gray says Bestbuy.com handles the competition for hot-skilled workers in part by using contract information technology workers for up to 25% of staff needs. He concedes the use of higher-priced IT contractors does drive up overall labor costs, but only temporarily, and only because Bestbuy.com has been in its initial building phase. “We don’t need to build in these resources over time at a fixed cost, we just need them for short-term development,” he says.

And in the short-term at least, higher compensation for hot skills is an expense Bestbuy.com and other web operators expect to bear. “The market hasn’t had time yet to develop a sufficient quantity of people with expertise to meet the demand as the new tools come out,” says Gray. “All of us in the e-commerce business jump on the same new technology, and we’re all fighting for those same resources.”