TGT Target Corp

By Laura Stevens And Loretta Chao 

For the past two years, Amazon.com Inc., Wal-Mart Stores Inc., Target Corp. and other big retailers have been flinging up warehouses and distribution centers across the country to get their online orders to customers faster.

In the coming holiday sales season, that building spree could come back to bite them--and the companies that deliver their packages.

With the nation's unemployment rate at a seven-year low as holiday hiring begins to pick up, some retailers and logistics contractors are already struggling to find enough seasonal workers to keep their new facilities humming. Soon, United Parcel Service Inc., FedEx Corp. and smaller regional delivery firms will be facing the same problem.

Employment agencies for retailers and logistics companies say they are having trouble finding warehouse workers to stock early holiday inventory and employees to train for work in fulfillment centers, where holiday orders will be packed and shipped.

Few could have predicted the nation's unemployment rate would fall to 5.1%, as it did last month, amid such red-hot growth in e-commerce. As a result, retailers and delivery companies expect to have to raise starting pay in some places.

For last-minute cybershoppers, the labor shortage may make the coming holiday season even riskier than the previous two, when Amazon and other retailers gummed up the works by trying to ship too many packages in the final days before Christmas.

"Last year was the first year that companies felt some challenge [finding workers], and this year they're feeling it even more," said Craig Rowley, leader of the retail practice at Hay Group, a provider of human-resource services. "Between the low unemployment rate and, hopefully, a good Christmas, it's going to be tough."

The crunch has spurred some retailers to start holiday hiring earlier than usual. And they are trying to figure out how to be flexible enough to accommodate employees who can only work certain hours or shifts.

Starting warehouse wages, which have been stagnant for years, have been rising by about $1.50 to $3 an hour to attract workers in some markets, according to logistics staffing firm ProLogistix. The firm said that in this holiday season, temporary jobs--especially at e-commerce companies--start in a range of between about $11 and $13.50 an hour, up from between about $9 and $11, though it varies significantly by region.

Ozburn-Hessey Logistics LLC, a third-party logistics provider, is raising its hourly wages by about 10% in some markets to compete for talent in e-commerce hot spots, such as around Louisville, Ky., and Memphis, Tenn., where UPS and FedEx, respectively, operate some of their biggest package-sorting hubs.

OHL, which typically employs 8,000 in 130 warehouses, plans to increase its staffing by between 35% and 40% during the holidays.

"There are a lot of warehouses there, and the market's saturated. In some areas, the unemployment rate is as low as 3% to 3.5%," said David Hauptman, the company's vice president of product marketing. "Many of the warehouses we've operated in, we've been in there for a while. It's not like we're new to the market. [But] Amazon and others have been coming in and putting wage pressure on us."

UPS announced its seasonal hiring plans Tuesday, saying it intends to hire as many as 95,000 employees this year--the same number as last year.

"Make no mistake, we're obviously feeling some of the crunch from those economic effects," said Bryan McHugh, corporate director of the company's human-resources operations. Mr. McHugh said he is confident UPS can hire all the seasonal workers it needs.

In some markets, that will mean paying more. The company's base starting salary for package handlers is $10.10 an hour.

UPS said during its most recent earnings call that it would better control holiday costs this year. Last year, it overran its holiday cost estimates by $200 million. A labor shortage pushing up wage rates won't make it any easier for the delivery giant, its rivals and its customers, all of whom are trying to keep costs down.

Amazon hasn't disclosed its seasonal hiring plans. Last year, Amazon said it would hire more than 80,000 people. FedEx increased its seasonal hiring last year by 25% to 50,000. It is expected to provide more guidance on its holiday plans during its earnings conference call Wednesday.

Many in the hiring game say the problem isn't just finding workers, but finding skilled workers. "It's hard to find people who can count, that have good math skills, that can communicate very well and follow direction," says Robert Tompkins, chief executive of a small logistics provider called Landis Logistics.

His company, which fulfills more than 600,000 orders annually from five warehouses with 40 employees in Reading, Pa., has been in need of two to three more full-time warehouse workers and about a dozen more seasonal warehouse workers to add holiday capacity for e-commerce clients. But, it hasn't been able to fill the full-time positions for 30 days, or more than double the time it took last year, despite rising salary offers.

E-commerce orders up the ante on hiring because it raises the difficulty for workers. "It's not just, throw something in a box--there's more to it," Mr. Tompkins said. "You've got to make sure it's packed accordingly, and make sure it gets to wherever it's going without having any damage. That does make it difficult to find people," he said.

He said Landis has raised pay by $1 to $2 an hour from its previous range of $10 to $15 and hour, and provides health and dental benefits.

As companies sweeten their offers, it has gotten harder to retain seasonal workers, especially in markets where multiple retailers and logistics companies compete for them, says Frank Layo, a retail strategist with Kurt Salmon. A growing number of his clients are having workers lured away by competitors offering a shorter commute or higher wages. That has forced those clients to raise wages or pay mileage bonuses.

"Early warning signs of people not being able to get enough labor are really starting to shine through," Mr. Layo said.

Write to Tess Stynes at tess.stynes@wsj.com

(END) Dow Jones Newswires

September 15, 2015 20:33 ET (00:33 GMT)

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