As recently as 2011, large-format retailers would typically hire 200-300 people a month. Now, their hiring level has plunged to 80-100.
A senior executive from a leading retail chain said the overall workforce base in the sector is 40% lower than the pre-2008 levels. The retail industry, which used to require 3-4 lakh new skilled personnel annually, is not desperate to hire any more.
Macroeconomic woes, coupled with climatic vagaries, have taken a heavy toll of expansion plans of retailers, slowing hiring significantly, said Sangeeta Lala, co-founder and vice president of TeamLease Services, a staffing firm.
To be sure, attrition rate stands at the usual 30-40%, especially in front-end roles. But employers are not actively seeking replacements, said Lala. Thus, for every ten people who quit, only six or seven replacements are made.
That is not all. To keep manpower costs low, retail firms are hiring temps “for roles like store promoters, supervisors and front-line jobs”, said Lala. Typically, temps are not taken on payrolls.
The hiring squeeze is a direct consequence of restructuring of many retail businesses that have been shutting 5-10% of their stores that proved unprofitable.
This is in stark contrast to the recent past when large-format retailers sought to open at least 70 stores annually. Now, retailers sustain a store for up to eight months within which it is expected to break even and turn profitable. Else, it’s curtains. End of story.
“Everyone is focused on profitability and no one is willing to keep a store which is not making money beyond a certain point,” said a senior executive at a retail chain.
Unlike in the past, retailers are not desperate to expand these days. Hence there are no pressing manpower requirements either, experts said.
Harminder Sahni, MD of Wazir Advisors, a retail consultancy, said though the investor sentiment is positive, caution characterises the retail industry these days.
“No money is coming from private equity players, nor are there any IPOs (initial public offerings) in the offing. Space is also an issue. All this is impacting retail expansion.”
“Impact” manifests in the form of bits-and-pieces expansion of retailers. Boldly going to newer cities where no retailer has gone before – well, that sort of sentiment is reined in for now.
For instance, Croma retail chain of Tata is looking to add 14 stores by March 2013, but without venturing to additional cities, said Ajit Joshi, MD and CEO, Infiniti Retail, operator of the chain. “Our 78 Croma stores are present in 15 cities. We will look at expanding only in existing cities.”
Other chains, too, have firmed up expansion-with-minimal-hiring plans.
The 185-outlet Spencer’s Retail will add about 25% additional trading space to its stores, putting the shop floor area in the range of 20,000-50,000 square feet. But it plans to have only 75-120 new hires per store, much lower than the earlier levels.
“Five years ago, we used to grow by 100-150% each year but now we’re selective,” said Nihar Ranjan Ghosh, executive director of HR, Spencer’s Retail.
Despite the turmoil, experts feel consumer sentiment remains strong, so future growth should be a certainty. Croma’s Joshi said Infiniti is witnessing double-digit growth as there has not been any decline in the buying pattern.
Kumar Rajagopalan, CEO of the Retailers Association of India, confirms the optimism. The retail industry, he said, is expected to grow at 20% and will need some 2.5 lakh trained people each year going forward.
In other words, the current hiring crunch may not be a permanent feature of the retail industry.