December 17 2007: 3:48 AM EST
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Stores hiring fewer holiday temps

The seasonal job is a classic way for retailers to respond to the heavy shopping period, but this year holiday jobs are way down. Will lack of service turn off shoppers?

By Suzanne Kapner, writer

Retailers are hiring fewer temp employees this holiday season, which may harm their ability to serve customers.

NEW YORK (Fortune) -- Like the holiday fruitcake and mistletoe, another staple of the Christmas season is the temporary retail job.

But less so this year. Faced with one of the toughest holiday shopping seasons in recent years, retailers are keeping a tight lid on hiring. Some 509,000 retail jobs were created in the October-November period, a 9 percent decrease over the same period last year, according to Challenger, Gray & Christmas, a Chicago-based staffing firm.

Unless there is a big upswing in December, the number of temporary jobs created by retailers this year is expected to shrink for the first time since 2001. "Retailers are being very cautious about staffing," said John Challenger, the firm's chief executive.

When times are lean, retailers look to cut expenses, and one way to keep costs down is to hire fewer seasonal employees. But the strategy may have unintended consequences. Stores that are too short-staffed risk turning off shoppers with spotty customer service.

And some believe such walk-outs are happening more. A record number of shoppers said they walked out of stores recently, because they couldn't find a sales clerk to help them, said Brit Beemer, founder of America's Research Group, who regularly surveys about 1,000 consumers to get a read on holiday sales trends. Nearly one-quarter of those surveyed said they walked out of a store without buying anything, because there was no one to help them, up from 22 percent who said so last year.

Some companies come to regret hiring cutbacks. Home Depot's (HD, Fortune 500) customer service plunged to all time lows after former chief executive Robert Nardelli, in a bid to save money, replaced knowledgeable full-time workers with inexperienced part time staff. The company has since embarked on a program to hire more experienced employees, such as retired plumbers and electricians, to better serve customer needs.

The last big drop in seasonal retail hiring occurred in the months following the Sept. 11 terrorist attacks, when temporary sales help shrunk by 26 percent to 585,000 workers, the lowest level in a decade, according to Challenger, Gray & Christmas, which parses data from the Bureau of Labor Statistics. Seasonal hiring has grown every year since 2003, amid stronger-than-average holiday sales gains.

This year, however, the National Retail Federation expects holiday sales to grow 4 percent to $474.5 billion, the slowest pace since 2002. To get customers shopping, retailers have offered big discounts and extended store hours. Macy's (M, Fortune 500) said this week, for instance, that it would keep seven stores, including its Herald Square flagship, open 24-hours during the pre-Christmas weekend.

Another way retailers could sooth shoppers' frazzled nerves (and boost their own sales) is by having enough trained staff on hand to fetch different sizes from the stock room, answer questions and make suggestions about holiday gifts. Andrew Buss, director of the retail and consumer practice for Archstone Consulting, points to Apple (AAPL, Fortune 500) as a good example. Despite the crowds, he said, it is never difficult to get assistance. "If you want to get the sales," Buss said, "you've got to have the help."  To top of page

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