HR Challenges 2026: The 6 Critical Issues Facing Canadian Retail

Canadian Retail: A Sector in Transformation

If you work in human resources within the Canadian retail sector, your industry is going through a period of significant transformation.

Retail employs nearly 3 million Canadians and remains a cornerstone of the national economy. Yet behind these impressive numbers lies a reality you are likely experiencing daily: unprecedented HR challenges that are fundamentally reshaping your role.

In March 2025, Canada’s retail sector lost more than 28,000 jobs, reflecting deep structural adjustments and sustained economic pressure. But here’s the paradox: despite these job losses, frontline and mid-level supervisory roles remain extremely difficult to fill.

Why this contradiction? While corporate roles are being eliminated, in-store, warehouse, and distribution centre positions remain hard to staff due to working conditions, wages, and limited career progression.

For HR professionals in Canadian retail, 2026 will be a pivotal year. Six major challenges lie ahead, each directly affecting performance, customer experience, and employer brand. Let’s examine these challenges to better understand their real-world impact and identify actionable levers.

The 6 Major HR Challenges Facing Canadian Retail in 2026

Challenge #1: Turnover : A Costly Hemorrhage

The numbers that hurt

Let’s take a look at the data, figures that may feel all too familiar:

• Annual turnover rate: 25.9% in retail, compared to 11.9% nationally
• Weekly turnover: 19% of retailers lose at least one hourly employee every week
• Intent to leave: 42% of retail sales associates are actively considering leaving their job

Retail turnover is more than a statistic, it is a critical issue that undermines operational performance and customer experience. When nearly half of your workforce is considering leaving, every dollar invested in recruitment, training, and development risks benefiting your competitors.

The vicious cycle of turnover

“Constant turnover in retail has a real impact on customer experience and operational efficiency,” explains Laura Hammond, HR consultant with experience at H&M and Aritzia, in an interview with RBC.

“When consumers have less discretionary income, [as is the case with persistent inflation in Canada] every dollar matters. To win those dollars, retailers must deliver a positive shopping experience through engaged and knowledgeable employees. When those employees leave, organizations get trapped in a perpetual recruitment cycle.”

This cycle has measurable consequences for Canadian retailers:

• Loss of expertise and customer knowledge
• Declining service quality
• Rising recruitment and training costs
• Increased workload for remaining employees
• Negative impact on employer brand

The hidden cost

Replacing a retail employee in Canada can cost between 30% and 400% of their annual salary, depending on the role, an amount that adds up quickly in high-turnover environments. Beyond direct recruitment costs, there are significant indirect costs: reduced productivity during onboarding, increased errors, lower morale among tenured employees, and most critically, a degraded customer experience that can directly affect sales.

Challenge #2: Talent Acquisition, When Hiring Becomes Mission Impossible

The labour shortage in numbers

• Only 47.9% of recruitment targets were met in 2024
• 38% of companies report longer customer wait times due to staffing shortages
• 29% of retailers see lower customer satisfaction when roles remain unfilled
• One-third of managers are working double shifts to cover vacancies

Gen Z is changing the rules

Attracting the right talent has become one of the biggest HR challenges in Canadian retail, particularly for frontline roles. Traditional recruitment methods no longer work, especially with Generation Z, who will represent 31.5% of Canada’s workforce by 2031.

This generation brings new expectations:

• Mobile-first experience: Applications must be mobile-friendly and take less than 10 minutes
• Authenticity and transparency: 77% of Gen Z candidates apply only to organizations with genuinely inclusive cultures
• Speed: Delays between interviews and job offers must be minimal

“In today’s tight labour market, retailers need to recruit earlier and more intelligently,” says Heidi Harman, Senior Director, Retail and Hospitality at UKG.

The employer brand challenge

In a market where candidates actively seek employers aligned with their values, your organization’s reputation is a critical recruitment lever. In Canada, 57% of job seekers (across industries) say online reviews influence their decision to apply, and up to 92% consider employer reputation an important factor in career decisions.

Satisfied employees play a pivotal role, they become your strongest ambassadors, attracting more qualified candidates than traditional paid job ads. Conversely, a poor employee experience quickly surfaces in online reviews, significantly reducing your organization’s appeal to talent.

Your employer brand is built daily, through every employee interaction, in every store and distribution centre and directly impacts your ability to attract and retain top talent across Canada.

Challenge #3: Compensation and Working Conditions, Retail’s Achilles’ Heel

A tough reality for retail employees

• Average hourly wages: Between $15 and $19.75, depending on the province
• Part-time work: 42% of retail employees work part-time, compared to 17% in other sectors
• Seasonal roles: 51% of retail employees hold seasonal positions, versus 43% elsewhere

One of the main reasons employees leave, or hesitate to join, Canadian retail is compensation and working conditions. Low wages, unstable schedules, and limited career growth make the sector particularly vulnerable to attrition.

The cost-of-living trap

With inflation and rising living costs across Canada, retail wages are losing even more of their appeal. Many employees juggle multiple jobs to make ends meet, increasing fatigue, reducing engagement, and accelerating exits toward more financially stable sectors.

Beyond pay: creative HR solutions

While significant wage increases are not always feasible for retailers operating on thin margins, other levers matter: scheduling flexibility, meaningful recognition, professional development opportunities, and a positive work environment can partially offset wage constraints.

Challenge #4: Skills Gaps and Training,  A Growing Divide

The skills deficit in numbers

• 67.8% of Canadian companies report employee skills gaps, with retail particularly affected
• 45% of retail employees do not feel prepared for digital transformation
• Only 12 hours per employee per year are allocated to training, an alarmingly low investment

Digital transformation is accelerating HR challenges

Modern retail demands far more than basic sales tasks. Retail employees in Canada must now master technical skills, complex problem-solving, omnichannel customer service, and continuous adaptability.

Technological change and the growth of e-commerce exacerbate these challenges. In Quebec, for example, over half of retailers selling online still generate less than 10% of revenue through digital channels, highlighting a clear need for stronger digital skills.

Operational consequences

Skills gaps lead to:

• Increased workload for experienced staff
• Limited internal promotion opportunities
• Reduced productivity
• Difficulty adopting new technologies
• Employee frustration and disengagement

Key barriers to training include organizational overload, limited resources, and insufficient internal expertise to design and deliver effective learning programs.

Challenge #5: Employee Experience, The Great Disconnect in Canadian Retail

The numbers behind the disconnect

• 37% of Canadian retail workers do not feel heard by their organization
• Only 19% would recommend their employer as a good place to work
• 16% say they identify with what their company stands for
• 67% report high stress related to workload

These figures point to a troubling reality: most employees feel unheard, undervalued, and disconnected. This disconnect directly affects retention, engagement, and customer service quality.

The multisite challenge

Delivering a consistent employee experience is especially complex for retail organizations operating across multiple locations. Management practices and working conditions vary widely between stores, distribution centres, warehouses, and corporate offices.

A store associate, a warehouse picker, and a head-office manager face very different realities, yet all represent the organization and deserve an equitable employee experience. Ensuring consistency across such diverse environments adds complexity for HR teams.

The critical role of frontline managers

Employee experience is largely shaped by the frontline manager, who serves as the primary link to the organization and embodies culture on a daily basis. When practices differ by location, employees quickly perceive inequities, deepening disengagement.

“For most frontline employees, their experience depends first and foremost on in-store leadership,” explains Laura Hammond. “Investing in managers and equipping them with the right tools enables them to create more inclusive and supportive environments for their teams.”

Challenge #6: Diversity, Equity, and Inclusion, A Strategic Imperative Overlooked

The facts speak for themselves

• 39% of candidates have declined a job offer because they perceived the organization as non-inclusive
• 75% of employees believe diversity policies have no real impact without clear and visible leadership commitment

The gap between frontline workers and leadership

Retail relies on a highly diverse workforce, across cultural backgrounds, generations, employment statuses, and personal realities. Yet this diversity is often underrepresented in middle and senior leadership, creating a concerning disconnect between frontline teams and decision-makers.

The financial impact of diversity

Underrepresentation is not just an equity issue, it has measurable financial consequences. Research shows that store performance improves when employee diversity reflects customer demographics, generating up to $67,000 in additional sales per percentage point of alignment.

Moreover, as consumers increasingly expect brands to address social issues, a lack of credible DEI efforts can directly damage reputation and talent attraction.

The consistency challenge

In multisite environments, building a coherent inclusive culture is particularly difficult. For retail employees, inclusion is experienced daily, through manager interactions, recognition of contributions, and equitable access to development opportunities.

The Cost of Inaction on HR Challenges

Each of these six challenges is significant on its own. Combined, they can be devastating for Canadian retailers:

• Recruitment vicious cycle: High turnover drives constant hiring, which becomes increasingly difficult and costly
• Declining customer experience: Disengaged employees deliver poorer service, directly affecting sales and customer satisfaction
• Loss of competitiveness: Ongoing attrition erodes expertise, limited training slows technology adoption, and weak talent attraction creates a growing gap versus retailers investing in people and omnichannel excellence
• Employer brand erosion: A negative reputation further complicates recruitment
• Direct financial impact: Rising operating costs and declining revenue

Organizations that ignore these challenges, or address them in silos, risk falling behind in an already highly competitive market.

How Employee Recognition Can Help Reverse These HR Challenges

Across these six interconnected challenges, one strategic lever stands out: employee recognition. Here is how it impacts each issue:

• Challenge #1 – Turnover: Organizations with strong recognition practices see 31% lower voluntary turnover
• Challenge #2 – Talent acquisition: Valued employees become powerful brand ambassadors, strengthening employer appeal to values-driven candidates
• Challenge #3 – Compensation: Recognition complements pay by valuing daily contributions, improving satisfaction even when wage increases are limited
• Challenge #4 – Skills gaps: Recognizing learning efforts encourages continuous development, boosting engagement by 20% and reducing post-training attrition
• Challenge #5 – Employee experience: 78% of employees say recognition improves job satisfaction and reduces disconnection
• Challenge #6 – DEI: Recognition ensures all contributions are valued equitably, strengthening inclusion and belonging across all work environments

But how can these benefits be translated into tangible results for your organization?

In the next article in this series, we will explore the real-world impact of employee recognition, with case studies, in-depth data, and concrete examples of organizations that have successfully made this shift. In the meantime, you can download our full report on the Future of HR in Canadian retail, to learn more on how recognition can be a great strategy to solve for 2026 challenges.