When Macy's introduced a self-checkout option in its mobile app in 2018, the department store bragged about how shoppers could peruse stores without having to wait in line to pay.
However, for several store employees, that raised red flags, raising fears that it might endanger their jobs or result in wage cuts.
Three years later, a union for Macy's workers has won its case against the tech-based strategy and how it excludes them from commissions.
Last Monday, an impartial arbitrator found that Macy's had broken the terms of the collective bargaining agreement and ordered it to stop allowing self-checkout in several departments, including men's suits and cosmetics.
About 600 United Food and Commercial Workers members who work at six stores in the Boston area and Rhode Island filed the grievance.
Over 11,000 Macy's employees are among the 1.3 million workers that the UFCW represents in major cities like Seattle, San Francisco, and New York City.
The labour dispute draws attention to the conflict between technology and retail workers.
Department stores and major grocers have been racing to catch up with direct-to-consumer e-commerce firms as they grabbed market share for years.
As Amazon grows its own physical presence, technology has become a key component.
Amazon Go uses sophisticated camera systems at its convenience stores to automate checkout, speeding up consumer payments and getting rid of the need for cashiers.
This technology is reportedly being introduced to at least some of its Amazon Fresh full-sized supermarket stores. A palm-scanning payment system is also being expanded to Whole Foods shops.
The pandemic has brought the discussion back to the fore. In order to reduce store visits and social isolation during the health crisis.
Consumers have downloaded apps and embraced innovative shopping practises including curbside pickup.
Shoppers have come to appreciate the extra convenience these services offer over time.
Retailers must now modify their digital capabilities, supply chains, and personnel even more quickly to stay up with changing consumer expectations.
For instance, data from Mastercard indicates that contactless payments have become commonplace.
In the third quarter of 2020, 41% of in-person transactions worldwide were contactless, up from 37% in the second quarter and 30% in the year prior.
Remaining competitive
Retailers in particular are under pressure "to reinvent themselves and reconsider the role of employees," according to Santiago Gallino, a professor at the Wharton School who specialises in digital transformation, or risk going extinct.
There are numerous cautionary tales in the sector, from RadioShack to Toys R Us.
Macy's does not wish to be added to that list. It has struggled for years with a drop in sales.
Sales decreased three years in a row, from 2015 to 2017. In 2019, revenue decreased once more.
Additionally, the pandemic made matters more difficult by forcing temporary store closures and resulting in a 28% decline in annual sales.
The technology was required for Macy's, according to the arbitration, "to remain competitive in an ever-changing retail industry."
Although Macy's declined to comment on the arbitration's conclusion, customers won't be affected right now.
In 2018, the firm added self-checkout, also known as scan and pay, to all of its roughly 500 Macy's locations.
Customers could use their phones to scan bar codes on merchandise and apply coupons or loyalty programme discounts on their own, but they had to ask a staff member to remove security tags from things.
Some categories were not included, including expensive things like mattresses and fine jewellery.
In order to make technological changes, Macy's disabled the option in October. According to company spokeswoman Blair Rosenberg.
There is no set date for when the feature will be enabled again. Stores covered by the arbitration would not sell it.
However, according to Macy's executives, the company would focus its spending on its digital division.
Using technology, such as self-checkout, to enhance the customer experience is a goal.
According to Macy's interim Chief Financial Officer Felicia Williams, who spoke at a virtual conference held by Goldman Sachs in September.
Wharton's Gallino noted that as shops modernise to remain relevant, CEOs must strike a careful balance.
introducing technology that customers want while emphasising the significance of staff, even if their job descriptions alter.
The response of these sales colleagues is not surprising, he said, if the topic of discussion is decreasing labour or hours.
"But I would hope that both employees and management can get to a better position if the store communicates the transformation the sector is going through and how the associates offer value in this climate."
He claimed that in the digital age, commissions have also grown more challenging.
Retailers have always used remuneration to reward staff' efforts on the sales floor, from bringing clients different sizes to making product recommendations.
When a consumer was checked out, the salesperson received compensation.
But increasingly, shoppers may visit a store to try on shoes, peruse the racks, or ask inquiries, only to subsequently purchase the item online.
Even if the employee played a key role in influencing the sale, he said, this can make it more difficult to track their involvement in it.
The connection between the cause and the effect, he observed, "is not that clean." "My sales rep may lose the motivation to be helpful and pay attention to a customer's demands the instant that relationship is broken," the manager said.
Retailers need to come up with fresh ideas on how to inspire good customer service as stores become more like showrooms, he claimed.
‘Just the beginning’
According to the decision, Macy's must give employees back wages equivalent to the roughly $2,000 in total scan and pay sales that would have been made at those six stores.
The self-checkout option only contributed to a minor portion of sales at the stores, according to Fernando Lemus, president of UFCW 1445, who represents the employees who filed the grievance.
Nevertheless, he claimed, workers want to guarantee that shifting tasks don't result in a wage reduction.
We were worried that this was only the beginning because technology in this business is still developing, he added.
According to him, as the retailer has reduced its personnel over the past five years, the number of Macy's employees in his local union has decreased by around 33%.
Some of those who still work in shops have also moved into occupations like processing online purchases.
The arbitrator's judgement was a relief for Terri Barkett, who works at the Macy's shop in Warwick, Rhode Island.
She claimed that unlike other of her coworkers, her pay is not commission-based. She expressed concern that scan and pay would eventually result in establishments having few or no cashiers.
Barkett has spent 19 years working for Macy's. She claimed that she enjoys assisting customers .
in selecting the ideal birthday present or special event attire, frequently searching high and low for the appropriate colour, style, or size.
She asserted that one of the most effective strategies used by merchants to increase sales and enhance customer loyalty is human connection.
She recalled checking out a customer just this past week and spotting the Tommy Bahama insignia on his clothing. She pointed to the display and informed him that the brand was on sale.
"He sprinted directly there. She remarked, "He got two more [shirts]. That cannot be seen by an app.
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