Retail news that keeps industry pros in the know
Retail Brew delivers the latest retail industry news and insights surrounding marketing, DTC, and e-commerce to keep leaders and decision-makers up to date.
Many complain about tipflation, the recently minted term for more businesses soliciting and expecting tips, a trend accelerated by those increasingly familiar choose-a-tip screens. Now a study by Gusto, a payroll and benefits platform, reveals just how ubiquitous tipping has become.
In July, 6.6% of retail stores in the US requested tips at checkout, compared to 3.8% that did so in July 2019, an increase of 70%.
Over the same five-year period:
- The share of ice cream and dessert shops soliciting tips rose from 38.89% to 55.17%, an increase of 42%.
- The share of bakeries soliciting tips rose from 36.36% to 49.27%, an increase of 36%.
- The share of coffee shops soliciting tips rose from 56.03% to 71.78%, an increase of 28%.
The data is based on Gusto payroll information from more than 300,000 businesses.
Tipper gore: For retailers specifically, those that solicit tips tend to pay lower wages, and even with tips their employees make less than retailers who don’t solicit tips.
In June, the average base pay for non-tipped retail workers was $3066.36, while the average base pay for tipped workers was $2,154.85, and the total pay after tips was $2,438.13, according to Gusto data.
That’s why, while some consumers view tipflation as a scourge, it may strike some retailers as a way to keep wages low without losing employees.
“Allowing employees to earn and accept tips may be a way for small businesses to alleviate some of the upward wage pressure for finding and retaining workers,” Gusto wrote about the data for retail pay on its website.
Bean counters: Unlike retail stores, at coffee shops it’s the workers in those shops that accept tips who tend to earn more. In June, the average monthly base pay for workers in coffee shops that solicit tips was $1,157.46, and the total pay after tips was $1,479.07; for coffee shops that don’t solicit tips, total monthly pay was $1,387.34.
In other words, coffee shops that solicit tips pay their workers 20% less than those that don’t, yet their workers make 6.6% more.
What could make that gap even wider? Presidential candidates Vice President Kamala Harris and former President Donald Trump are both proposing to eliminate federal taxes on tips.