Friday, 24 May 2013

When will EDI (Employers Direct Investment) happen in Retail?

FDI in retail is now permitted in India, which may boost the sector, but when will EDI (Employers Direct Investment) happen to create the talent pool for the Retail sector, which will be essential for this growth. The foreign retailers will bring in Processes, systems, logistics, operational efficiency, money, but what about the talent. Retail being a people intensive sector, every investment in this sector will fail, if not supported by proper investment in people to convert them to Retail Talent.

We are one of the biggest retail markets in the world, considering the huge consumer base of our country. Industry figures suggest that we are a whopping $450 billion Retail Market, thereby placing us in the top five retail markets in the world. The Indian retail market stood at $396 billion in 2011, according to a study done by the consulting firm Deloitte.
The journey has not been smooth. From shopping at our local Kirana store to picking up our daily requirements from the nearest Mall has been quick journey albeit bumpy. But what we have achieved as an industry in a short span of time is commendable.

Consider this: Organized Retail market is just 4% of the entire retail market in India, which means our Baniya stores / unorganized sector, still calls for shots in the industry. But that said we are seeing a change. Larger formats, convenient store, super markets and hypermarket structures are evolving. They are changing their outlook to suit the Indian requirements and mindset.

The glory of the Indian retail sector lies in the hands of people/Talent who man it. You have the likes of Mr. Kishore Biyani, Mr. B.S. Nagesh, Raj Jain, who have converted the Retail sector into a professionally managed Industry. It is their great leadership and revolutionary thoughts that lead to the big Indian retail story. Our country will need many more such retail entrepreneurs / professionals, who can make significant changes to this emerging sector.

Unfortunately, the leadership qualities are not trickling down to the grass roots levels. While on one hand organized retail which constitutes a small four per cent of total retail sector is growing at a much faster pace of 45-50% per annum and quadruples its share in total retail trade to 16% in the coming years as per a study done Corporate Catalyst India, a market consulting firm. “The organized retail segment expected to be 9% of total retail market by 2015 and 20% by 2020,” said Deloitte report, adding that semi-urban and rural segments are growing at a rapid pace, currently accounting for 33 % of revenues in 2011.

Recent announcement by government on FDI in India is only expected to push this growth even further. But is the industry ready to take that kind of a growth? Are we ready to open up so many more stores that comes with the growth? When I look at it from a Retail Talent angle, the growth almost seems a “Rasta Roko” because we simply do not have enough Talent to man our stores.

I am not talking about mid level and senior level employees. Not that we have them in abundance, but we could at least get them to join us from other sectors because convincing the candidates and the retail companies who hire them is achievable. My point here is, there is terrible shortage of floor level staff. Nobody wants to see themselves as “someone selling things.” It is not considered attractive. It is frowned upon and considered a lowly profile. Retail sector is one of the largest employers in the country. About 70% of the people employed in the retail sector are junior level employees. A 2011 report on retail sector compiled by research consulting firm Technopak rightly highlighted the fact that there is shortage of trained manpower in Retail sector.

In the initial phase of retail growth every body were new to these concepts. Most companies had to expand quickly to make their presence felt so they just hired in bulk not really looking into the quality of the employees. I am not talking about luxury retailers here. They are exceptionally good and extremely picky in their candidates. But I am talking about value segment. There was no method in hiring. Most of the retailers, are relying upon the bigger players to invest in training & development, which is why the industry has huge attrition. The Challenge for every retailer now would be to invest hugely & wisely on Human resources, which will get converted into Retail Talent.

But the scene is changing now. With the Indian government approving 51% foreign direct investment in multi-brand retail chains, things are set to change (at present foreign investors can hold up to 24%, but FDI is not allowed), “Nine states and three union territories have shown interest for opening retail to FDI,” said a recent study done by Edelweiss. To compete with the foreign brands it is very important for Indian retail companies to become more competent in the way they hire.

The Big Hurdles:

Lack of information: In my effort to find any study done on retail sector from an HR perspective turned futile. Whatever little was available did not talk about ground level staff. This could because the companies may not want to share information on floor staff to prevent poaching and making their pay scale public. This calls for more clarity and transparency in hiring process.

Mandatory to work on holidays: This is in my opinion the second biggest hurdle. A floor level staff has to work on weekends, public holidays and festivals. Understandably, that is the time when a store gets maximum footfalls. It is the common complaint among the floor level staff, “When the whole world is holidaying and having fun, I am slogging.”
Well it’s a different thing that they get a lot of incentives, but people outside the retail sector are not aware of it.

Sales job not something to aspire for: There is growing dislike among people for sales job. I have even seen many candidates frowning at it the minute we mention that it is a sales job. Yes, it is stressful and constant worry to meet milestones and targets may bog you down. But at the same time it is also rewarding. For every target achieved they get hefty bonuses and pay packets. It also rewards you in other ways as to you constantly get to meet new people.

Absence of soft skills: Indian education system does not give scope for a student to develop good communication and soft skills. It’s very easy to find someone who can show a certificate to prove his or her knowledge of English. But get them to speak to you in English, that’s where they fail. Moreover, the next wave of retail growth is expected to come from tier-II and tier-III cities. The level of language skills in these towns and cities is even lower than metros.

Career growth not evident: one does not require a post graduate degree to become a floor level employee. Companies usually hire 12 standard passing students. But that said there is a defined career path which people outside the industry are not aware. One can slowly grow in the company to senior level positions.

High attrition: Retail sector in India is plagued by high attrition. “High employee turnover in this sector has made Engaging and Retaining talent a perennial burning priority in this sector,” said Deloitte report.
Considering the growth potential the Indian retail sector offers it does not harm to working towards a solution for the problems. It is up to the us, the industry stakeholders, to sit back and give a serious thought at improve the quality of our manpower and in my opinion, the quantity will follow. Some immediate solutions to the above-mentioned problems are as follows:

Need for a retail finishing school:  There is badly a need for retail finishing school. Although there are a couple of such schools, they just train candidates with basic skills. A candidate needs good communication skills, ability to convince, ability to present themselves formally, product knowledge and above the candidate should be able to seamlessly switch between all the departments of a particular store. There is no such finishing school in our country today. I call for a serious consideration to set up many such schools and they should not just be in metros, but should be present in tier-II and tier-III cities.

Build awareness: many people are not aware of the fact that these employees get bonuses and incentives. Retail companies and mall owners should put an effort to let people know that these are the benefits of working in retail industry. While most of the companies have a variable pay plan for corporate and support staff, attractive sales incentive schemes is a common practice for the front line sales force to motivate them to exceed expectations. Monthly/Quarterly/Biannual incentive based payments against annual payments is gaining popularity in this sector, considered effective to motivate people in a high turnover sector like retail.
Invest in an employee: I agree that attrition is high and it is something that stops companies from investing on employees. But in the long run, investing in an employee is what pays off. Not all employees quit a job just for money, or even if they do so today, they may regret later. So it is good to have extensive training program for employees. Get them aware of all departments at all levels in a store. Move them from supply chain to sales to handling cash and payments. Even your consumers might like to see new faces every now then. We are in a sector where it is very important to keep our customers happy and for that training has become very critical.

Also retaining a good employee has could reduce costs for a retail company, because it is important to note that even hiring a new employee comes at a cost. Shoppers’ Stop, is one such organisation, which invested very high on Retail talent, & today it is clear the Shoppers’ Stop has been a Retail School for the industry. You will hardly find any retailer worth its while, who does not have the ex-employees of Shoppers’ Stop. With the opening of the sector, the only way the retailer can sustain is by investing on its people (EDI), which will ease the demand in the sector, as more talent will be generated.

Hence, while the foreign retailers, will now queue-up to come to this huge market, what every retailer will have to look for is to create a talent pool, domestically. Also there is a huge population of Indian people across the globe, working in the retail sector, which will eventually want to come back to India. This is another ready made retail talent, which the industry can benefit from. All said, in Retail “Dikhta hai, toh biktha hai”, so will the retail talent. If you invest in retail talent, it will pay off.

 Note: This article was published in Retail Today magazine, October 2012 issue.

About the author:
Barkat Charania, is the Chief Executive Officer of a speciality Retail Recruitment Company “Beyond Talent”, founded by an industry stalwart, Mr. Susil S. Dungarwal.  Barkat has over a decade’s experience in placements & Head hunting, and has been an avid follower of the Retail sector. Beyond Talent Management Pvt. Ltd. currently, works with many leading retailers, for fulfilling the talent crunch across various verticals of Retail on a pan India basis.

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