People wear face masks as they walk through Herald Square in New York City on January 8, 2021.

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When Macy’s introduced a new self-checkout feature on its mobile app in 2018, the department store pointed out how customers could browse stores but skip the hassle at the checkout. For some business partners, however, this triggered alarm bells – and feared that this would jeopardize their jobs or dock their pay.

Three years later, a union representing Macy’s employees won a victory in questioning the technology-based approach and determining how it cuts them out of commissions. An independent arbitrator ruled last week that Macy’s had breached its collective bargaining agreement, saying the company must exclude commission-paid departments like men’s suits and cosmetics from self-checkout.

The complaint was filed by approximately 600 employees in six stores in the Boston and Rhode Island area that are part of the United Food and Commercial Workers. UFCW represents 1.3 million workers, including over 11,000 Macy’s workers in major cities such as Seattle, San Francisco and New York City.

The labor dispute highlights the tension between technology and retail workers. For years, retailers, from department stores to large grocers, have tried to keep up as online giant Amazon and ecommerce brands that go direct to consumers stole market share.

Amazon has made technology a key feature as it expands its own stationary footprint. In the convenience stores called Amazon Go, high-tech camera systems are used that automate the check-out. This speeds up payments for customers and eliminates the need for cashiers. It is believed that this technology will be rolled out in at least some of its large Amazon Fresh grocery stores. In addition, the palm scanning payment system is also being rolled out to Whole Foods stores.

With the pandemic, the debate has come back to the fore. Consumers have downloaded apps and introduced new modes of shopping like roadside pickup to limit business travel and social distance during the health crisis. Along the way, buyers have learned to love the added convenience these services provide. This is an additional urgency for retailers to adapt their digital options, supply chain and workforce to keep up with consumer preferences.

For example, contactless payments have become mainstream, according to Mastercard. It found that 41% of in-person transactions worldwide in the third quarter of 2020 were contactless, up from 37% in the second quarter and 30% last year.

Stay competitive

Santiago Gallino, a professor at Wharton School who specializes in digital transformation, said retailers in particular are under pressure to “reinvent themselves and rethink the role of employees” or face extinction. The industry is littered with warning messages, from RadioShack to Toys R Us.

Macy’s does not want to join this list. It has struggled with years of decline in sales. Sales decreased for three consecutive years from 2015 to 2017. Sales fell again in 2019. The pandemic exacerbated the challenge with stores temporarily closing and annual sales falling about 28%.

In the arbitration, Macy’s said the technology “is needed to stay competitive in an ever-changing retail market”.

While Macy’s refused to comment on the outcome of the arbitration, the ruling will have no immediate effect on customers.

The company expanded the self-checkout function (Scan and Pay) to all 500 or so Macy’s stores in 2018. Customers could scan barcodes on items with their cell phones and apply vouchers or loyalty program discounts themselves, but had to receive security labels from an employee. The function excluded some departments, e.g. B. Items with large tickets such as mattresses and fine jewelry.

Macy’s took the feature offline in October due to technical improvements and has no schedule for when it will be brought back, company spokeswoman Blair Rosenberg said. It would not be available in stores under arbitration.

However, Macy executives have announced that they will be focusing their investments on digital business. At a virtual conference hosted by Goldman Sachs in September, Felicia Williams, Macy’s interim chief financial officer, said using technology – including self-checkout – to improve the customer experience is a priority.

As retailers adapt to stay relevant, Wharton Gallino executives have to strike a delicate balance: adding technology that customers want and emphasizing the importance of employees even as their job descriptions change.

“When it comes to manpower and hourly reductions, the response from these salespeople is no surprise,” he said. “But if the retailer explains the changes the industry is going through and how the employees are adding value in this environment, then I would hope that both the employees and management can get to a better place.”

He said commissions have gotten harder in a digital world too. In the past, retailers used pay to fuel employee efforts on the sales floor, from picking up customers of other sizes to recommending goods. The payout was made for the sales rep when he checked out a customer.

Increasingly, however, customers come to a store to try on a pair of shoes, rummage through aisles or ask questions – only to later buy the item online. This can make it harder to keep track of the employee’s role in that sale, even if they were instrumental in influencing that sale, he said.

“The cause-and-effect link isn’t that clear,” he said. “The moment that connection is broken, my sales rep may lose the incentive to be helpful and listen to a customer’s needs.”

With stores serving more than showrooms, retailers need to think about new ways to motivate strong customer service.

‘Just the beginning’

As part of the ruling, Macy’s will have to make a repayment that employees at those six stores with total sales of approximately $ 2,000 would have made through scanning and paying.

Fernando Lemus, who represents the workers who filed the complaint as president of UFCW 1445, said the self-checkout feature triggered a small number of sales in stores. Even so, he said, employees want to make sure that changing responsibilities doesn’t lead to a cut in wages.

“As technology advances in this industry, we were concerned that this was just the beginning,” he said.

Over the past five years, he said, Macy’s employees in his local union have declined by about 33% as the retailer cuts its workforce – and some who still work in stores have taken on jobs like fulfilling online orders.

For Terri Barkett, who works at the Macy’s store in Warwick, Rhode Island, the umpire’s decision was a relief. Unlike some of her colleagues, she said her wages are not based on commissions. But she said she feared scanning and paying could ultimately result in deals with few, if any, cashiers.

Barkett has been with Macy’s for 19 years. She loves to help customers find the perfect birthday present or outfits for special occasions – and often looks high and low for the right color, style, or size. She believes the human connection is one of the retailer’s most powerful tools to deepen loyalty and generate higher sales.

Just this week, she said, she checked out a customer and noticed the Tommy Bahama logo on his shirt. She told him the brand was for sale and pointed to the display.

“He ran over there in a moment. He has two more [shirts]”, she said.” An app can’t see that. “