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Labour Market in Retail Sector

Coleman Services
Market Trends
Both food and non-food  retail sectors have demonstrated and continue to enjoy rapid development in modern Russia. The pace may have somewhat slackened compared to 2005-2008, but increasing earnings and so increasing consumer spending invites retail companies to expand further. Depending on a type of retail activity, whether a product or service-based, or a region, competition may be intense, moderate, nascent or virtually non-existent. This indicates that retail market in Russia has taken definite shape, but is not by any means saturated. It is still forming, and retail companies are eager to identify and exploit  new market niches. New shopping centers are being built and put into operation. High street retailers are matching the pace. Hypermarkets, chain restaurants, retail banking, consumer electronics & home appliances, clothing, beauty parlours and perfumeries, pharmacies and specialized shops  all seize the chances to get a footing in the growing market.

With the development of the retail market, labour availability becomes of critical importance. Retailers, l, especially in foods, must control costs in order to retain a competitive edge. These cost-saving strategies necessarily impact on the personnel-related costs and budgets. In most cases, staff engaged in operations do not need a qualification or a university degree, as product- or service-specific knowledge can be acquired on the job. As a consequence, retail companies do not offer the most attractive salaries on the market, and so personnel turnover within retail is conspicuously high.  Further, the high ratio of staff engaged in operations to management makes it difficult to chart career plans for every person who joins the organization, and  long-term employee loyalty is rare in most retail companies. While  growing , retailers understandably put labour availability in front of labour productivity. Hiring comes before performance improvement.

Current labor market trends within retail industry are indicative of the general market recovery  and return to pre-crisis conditions. Our clients, large multinational organizations representing both food and non-food retail segments, all concur on trends that became apparent during 2011:
- Personnel turnover, which had decreased during crisis,  has recently  returned to pre-crisis levels:
- Good candidates are scarce, and there is a marked competition between employers for them: it is  the labour seller’s market;
- The keys to getting the best talent are  the speed of a hiring decision as well as the salary offered.

Retail Labour Market Forecast

The mid to long-term perspective does not look so bright for retailers. Rapid growth means quicker market saturation. As an upshot, competition for the customers’ attention will be much more pronounced. In order to ensure consistent growth, retailers will have to shift from market-conquering to customer-winning strategies. Obviously that will imply a revised approach to management, with precise customer-focused market research, balanced pricing, improvement of service quality HR issues will move up the list of priorities for retailers.

 Several challenges are impending The number of students employed part-time will be decimated because of the demographic pitfall Russia experienced with the economic instability of 1990s. The influx of personnel may further be reduced by government regulations forbidding unqualified foreign labour. The conclusion is obvious: the competition for customers’ attention will be won by those who already won the competition for talent.

Attracting and Retaining: HR Brand Value

To a degree, any company in a rapid development stage can disregard the quality of the personnel. When the market is saturated, personnel quality becomes of paramount importance. By quality we understand not only qualifications and skills, but key competencies necessary for good performance. It is not enough to recruit a shop consultant, it is more important to train and keep him/her motivated to perform well.

Recruiting good candidates can be a problem too. In Moscow, where the unemployment rate is forecast to be below 1% (source: www.rosstat.ru ) for 2011, a shortage of both qualified and unqualified personnel makes it difficult for an employer to negotiate bargain rates. When looking for a job, a candidate is likely to have one already and feel more confident. If  each candidate has a choice between  several offers, it is evident that the Moscow labour market has changed compared to 2009-2010, and retail is no exception. Technically, it would seem unavoidable that employers must offer higher salaries in order to get the best candidate. For the employer, the problem is that  the cost increase is not really connected to labour productivity. But luckily it’s not all about the money for the candidate himself.

The good candidate will want to consider things important to him/her. Flexible hours, proximity to home, opportunities for career growth, good team, competent management – some or all of these come to mind to any experienced job seeker. Many employers pride themselves on having all these things. But  in reality, too few retailers ask their employees for an opinion – it is easier to replace a disgruntled employee than analyze the problem. But what if the problem is indeed important and causes excessive staff turnover ? What kind of PR will the company receive in our age of social networks? No doubt the company’s reputation/  HR Brand is tarnished.  Fewer people will want to work there r , creating holes in staff lists widen, workloads for incumbents increase with no change in compensation An increasing number quit, and costs rise. It is a downward spiral, as formidable as any in retail business.  
Ways to= trim personnel costs may be hard to see, but they are already being implemented by more circumspect retailers. Personnel satisfaction surveys, non-monetary incentives, employee hotlines – burdensome, costly, even obscure for management or an investment that pays off? It is a task for a financial analyst to come up with a Profit & Loss statement substantiating cost-efficiency of such instruments for a specific company or business.

In this context, retailers would also do wise to introduce a career development system which will allow to identify the best talent from within the organization. Successful careers are a very effective instrument of motivating personnel, and strengthen the HR brand. Between two employers, other things being equal, a candidate will choose the company where an internal promotion is more likely to occur. Such company will boast a lesser employee turnover and greater loyalty. The longer the person works, the more competent he gets at his job, and  the faster his productivity grows. The customers will appreciate it. The management should do likewise. In economic terms, if the trained and skilled employee can do twice the workload of an untrained for only +50% of the salary, the cost-efficiency is obvious. It has more strategic advantages: competent and experienced employee serve as role model for new colleagues, and basic training costs can be cut.

Labor Availability Forecast

Of course the change from market development to market saturation does not happen with a loud crack for every retailer to snap to attention. Changes in the labour market do not appear overnight. For a while , retailers may pursue their  operational goals paying little heed to what may happen tomorrow. But it is the very subtlety of these changes that makes them the more dangerous. It is also too easy to let  a quietly important goal slip down the priority list. Having it all here and now may seem the number one priority, but an insightful business mind will recognize the impending risks and challenges, and invent counter-measures. Retailers who dedicate time to analyze their current work force problems and implement necessary HR solutions now, will have created a springboard for further development and winning the next war for customers.

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