High Attrition Rate Continues To Plague Services: ASSOCHAM Survey

Unabated level of attrition rate continues to plague India Inc and spreading fast from IT and ITes to other service sectors such as civil aviation, financial services, retail and engineering, according to an ASSOCHAM Eco Pulse Study. The highlights of the study are:-

• While the attrition rate in IT and ITes sector has slowed by 10 per cent to fall in the range of 25-30 per cent in the year 2007 as compared to 35-40 per cent rate in previous year but the services sector at the crucial juncture of their growth including civil aviation, financial services and retail are facing tough times in retaining their staff.
• Big time consolidation in the civil aviation sector has fuelled attrition to an unmanageable level of 46 per cent as the pilots and cabin crew spot opportunities in growing demand by domestic as well as foreign airlines.
• Dearth of professionals, technical nature of operations, increasing finance-KPOs and attractive salary packages have led to rising job hopping at entry and middle level in the financial services sector. The attrition level has increased from 32 per cent in the year 2006 to 44 per cent in the current year.
• Banking, trading and real estates are facing maximum problem due to the job changing by the human resource.
• Massive expansion in the retail sector is accompanied with rapidly increasing attrition rate to even to the extent of 50 per cent in few cases. The companies now prefer to sign bonds for three years as they are imparting them the necessary training and specialized knowledge of retail functions.
• Growth in construction activities in the economy has led to surge in demand for engineers, resulting into increase in their movement across companies at rate of 25 per cent. The engineering companies are sorting to pay hikes and growth assurance, to curtail the attrition level.
• Level of attrition rate in the manufacturing sector has remained almost same at 20 per cent in 2007 as previous year. The functional areas like those of production, maintenance and safety controls, bear highest attrition problem.
• Loss of intellectual property is one of the most challenging problems faced by the companies as an upshot of attrition. Hospitality, IT, hospitals, engineering sectors are worst affected sectors in terms of intellectual property loss especially in absence of any laws to protect interest of an organization from employee turnover.
• The Study has found that the maximum of attrition is taking place among the employees who are in age group of 26 to 30 years. It found that the segment of employees who are most vulnerable to change are with experience range between 2 to 4 years.
• The most stable chunk of employees is found to be in age 39 to 45 years as they find themselves to be unsettled in their jobs and companies that they have been associated.
• Attrition trend also reveals that women employees are less prone to frequent job changing than their male counterparts. For every 10 males jumping the fence by changing the job, there was only 2 females crossing over.
• The immediate gains in salary package was found to be responsible for job change in almost all the sectors, however the growth potential remains an important reason prompting employee movement.

Is Small Bazaar replacing Big Bazaar in retail food chains in India

Pantaloon's Kishore Biyani is bringing his new stores - call it 'Small Bazaar' - , which will be small, like Subhiksha, which is a convenience store format and will look to address the daily shopping needs of consumers. For the past 18 months, Pantaloon has ben working on new project for the launch of KB's Fairprice Value Stores (KBFVS), a no-frills, deep discount format, sometime in August that will focus on local catchment areas and service the daily requirements of consumers. This is a radically different concept and services model which is based on a German no-frills discount format, LIDL (Owned by Schwarz). Pantaloon is planning a 'bombardment strategy' that will see the group swarming a particular area with clusters of stores. The group plans to set up 1500 stores over 18 months across top cities.

These non-ac, basic format stores will offer limited stock-keeping units with massive discounts, but will not compete with kiranas. The launch is also the result of consumer learning that

• Indians prefer fresh supplies and proximity of stores in residential areas to make frequent purchases
• More often than not, indian consumers do not have access to good roads, cheap fuel or have large storage space to stock up the bug volume purchases
• the traditional kirana style is best suited to the Indian consumer's needs

In fact, most of the modern food retailers have recently begun following the kirana (local mom-'n'-pop stores) business strategy of setting up smaller convenience food and grocery stores. These stores have positioned themselves as upscale kiranas with back-end efficiencies of a large retailer, new format such as Trumart. Spencers Daily, Wadhwani's Spinach, Vishal, D Mart and others are offering the kirana convenience of being situated locally and offering similar services such as taking orders over phone and making home deliveries.

Change in Strategy

Earlier, most of them had set up stores in the larger format hoping a higher conversion rate (consumers actually making purchases) from the footfalls in these farmats, a strategy which did not prove too profitable. Retailers say most consumers tend to visit these areas as entertainment zones rather than making their daily basic grocery purchases.

Convenience store formats are also able to get better bargains with suppliers and manufacturers by offering business scales higher than the local kirana. Consequently, manufacturers have begun stepping up discounts to the new formats, industry players said to ET.

Kishore Biyani - In Brief

Biyani, 45, is CEO, Future Group, which is designed to cater to the entire Indian consumption space. After graduating in commerce, Biyani joined the family textiles business. Five years later he launched the first branded ready-made trouser, called Pantaloon, marketed through The Pantaloon Shoppe.

Founded in 1987, as a garment manufacturing company, Pantaloon entered modern retail in 1997 with the opening of a chain of department stores, Pantaloons. In 2001, Biyani evolved a pan-Indian, class-less model — Big Bazaar, a hypermarket chain, leading to the democratisation of shopping in India. With Food Bazaar, a supermarket chain, he blended the look, touch and feel of Indian bazaars with western hygiene and it has now evolved into the favoured destination for Indian homemakers. The Future Group operates through six verticals: Future Retail (encompassing all lines of retail business), Future Capital (financial products and services), Future Brands (all brands owned or managed by group companies), Future Space (management of retail real estate), Future Logistics (management of supply chain and distribution) and Future Media (development and management of retail media spaces).

The group's flagship enterprise, Pantaloon Retail, is India's leading retail company with presence in food, fashion and footwear, home solutions and consumer electronics, books and music, health, wellness and beauty, general merchandise, communication products, e-tailing and leisure, and entertainment.

Aditya Retail launches 'more' brand of retail stores

RETAIL COMPETING: Mr Kumar Mangalam Birla, Chairman, Aditya Birla Group (right), and Mr Sumant Sinha, CEO, Aditya Birla Retail, at a press conference in Mumbai (From Hindu Business Line)

Aditya Retail, promoted by the Aditya Birla Group has announced the launch of 'more' brand of stores on May 18th, 2007 to sell fresh fruits, vegetables and groceries through a chain of retail outlets across the country. They would not have any joint venture for this purpose. While unveiling the 'more' brand in Mumbai, Aditya Group Chairman Mr. Kumar Mangalam Birla said: "we intend to invest at least INR 9000 crores over a period of three years to set up 1000 'more' brand stores across the metros and in the tier 1 cities of India.

Recently Birla Group acquired South India based Trinethra supermarket chain. It is expected that Birla Group wants to grow inorganically by such more acquisitions in the future.The funding for the expansion comes as a mixture of debt and equity. However, the chairman does not rule out the option of tapping capital markets in future for raising resources.

To assure cost effective and freshest supply of fruits and vegetables, the Aditya Retail is in a process of building direct linkages with the farmers to eliminate the costs incurred in the supply chain. Within a year's time, the retail chain is expected to hire skilled manpower of not less than 10,000 people to operate the 'more' brand stores across the country. The first 'more' store is scheduled to open in the Pune city in June.

Aditya Birla Retail will compete with the other large industrial groups such as Bharti and Reliance Industries, which have announced plans to invest, over time, Rs 10,000 crore and Rs 25,000 crore respectively in their retail ventures.

Related Articles:-

1. Sumant Sinha returns to India to unlock the value of the Birla Group

2. Aditya Birla Retail — To be among the leading players

Manpower Management, Real Estate and Supply Chain will be the key in Retail

A revolution is set to sweep across the country in the next three-to-five years in the retail sector, as traditional markets make way for departmental stores, hypermarkets and western-style malls. While penetration of organised retail in India remains slightly below 4%, domestic major retail players have announced aggressive expansion plans even as a plethora of new flashy malls are mushrooming in metros and second-rung cities. Three ‘big bang’ initiatives are shaking up the retail sector: Reliance Industries’ Rs 25,000-crore mega plan to create 100 million square feet of retail space and a sales target of Rs 100,000 crore by 2011, Aditya Birla Group’s Rs 15,000-crore retail foray and retail giant Wal-Mart’s entry via a joint venture with Bharti.

Even with net profit margins of only 4%, the return on investment is 16-18%. Besides, India’s vast middle class and its almost untapped retail industry are key attractions for global retail giants wanting to enter newer markets.

While there may be droves of young people applying for a spot behind the register, without any tradition of large retail stores in India, there is a paucity of experienced manpower available for mid-management positions. Meeting suitable manpower requirements and managing human resources in the future will become a challenge as competition hots up, experts feel. This is great opportunities for MBA students to look at this sector wherein you have also chance to prove your mettle and it is a emerging sector which may play for atleast next ten years. The other opportunities in these sectors include supply chain management and agricultural management. In fact, Reliance want to acquire 2000 acres of land in Karnataka in all District and Taluka headquarters for agriculture and it is also recruiting fresh agricultural graduates for a pay package of Rs. 3-3.50 Lakh per annum, till now an unkown figure in this sector.

Moreover, due to the increasing demand for manpower at the junior management level, number of schools and institutions have started offering retail specific syllabus. Retail management has come up as a seperate course in many B-schools. In fact, ISB has recently introduced an elective on retail management in its curriculum.

Presently, due to the dearth of experienced talent in this field, Reliance Retail is in the process of hiring around 100 senior expat managers, of which, 50-60 managers with 15-20 years of retail experience in global biggies like Wal-Mart, Best Buy, Tesco, ASDA and Kroger, have already joined the company. The AV Birla Group, which is readying itself for a retail venture, also intends to tap expats with overseas experience for its leadership team comprising 30-40 persons.

With some 350-odd mall expected to come up in the next three years, availability of reatil space is another major concern. Technopak Advisors pegs the gap between supply and demand of reatil space at a staggering 400 million square feet. Given the fact that large pockets of land are more easily available in smaller towns than in the metros, players such as Reliance have announced major retail forays in tier 2 towns. Tier 2 and 3 cities will be major growth drivers in future. So, if you are taking a management job in this sector, be ready to move to Tier 2 or 3 cities. However, while tier 2 cities represent an immense opportunity, infrastructure remains a major issue.

Another major issue is supply chain management. Significant invetsment in restructuring of the existing fragmented market in supply chain management is needed. According to a recent report by Enam Securities, cutting the number of intermediaries between the farmer and the reatiler could reduce costs by almost 7%. An estimated investment of Rs. 5000 crores will be needed to restructure the supply chain.

Detailed articles brought by ET Retail Survey

1. Mall Mania

2. Retail’s the next big-bang story

3. Shopping for space

4. Search warrant for human resources

5. The race is on

Opportunities in Retail:-

1. Reliance Retail

Poaching is the new game in retail sector

The Indian retail space has recently seen hectic action with Bharti’s Sunil Mittal joining hands with US-based world No 1 Wal-Mart. The $300-billion Indian retail sector is attracting foreign retail giants and local majors such as the Reliance group and the Tatas. With Wal-Mart coming to India with Bharatis as JV , Indian retail sector is hotting up with poaching exercise. As time and energy are involved in establishing new outlets, major players are looking for inorganic growth, by going out for acquisitions of companies with presence in multiple cities. These acquisitions will help these big players to come out with sufficent outlets before the Wal-Mart can make its presence felt in India.

1. Reliance Retail acquires Gujarat-based Adani Retail:-

In the first week of December, 2006, Reliance Retail started its first acquisition by buying out Gujarat-based Adani Retail lock, stock and barrel for Rs 100-110 crore. Sources confirming the news said the buy-out will give Reliance access to 54 retail locations (neighbourhood stores, supermarkets and hypermarkets) across nine cities in Gujarat in one shot, besides its infrastructure and sourcing facilities. As commercial real estate prices shoot up across India, the acquisition will help the company control costs substantially because 60% of Adani’s retail outlets are company-owned. The deal also works well for Adani as it will now focus on its core competencies like shipping and exports.

At present, Adani Retail operates a total of 54 supermarkets and hypermarkets and is likely to launch another outlet in Bharuch this week. The Rs 16,000-crore Adani group forayed into retail by acquiring a leading supermarket store V Ravjis in 2000. While in the first two years, the company did not expand into other cities, it moved faster in the last four years with presence in Ahmedabad, Vadodara, Jamnagar, Surat, Rajkot, Anand, Nadiad, Mundra, Gandhinagar and Navsari. Adani's neighbourhood stores are typically 1,500-3000 sq ft and sells food & grocery.

The supermarkets, around 3,500-4,000 sq ft each, sell plastic items, crockery, cosmetics, imported products and the hypermarkets, around 8,000-25,000 sq ft, have dedicated sections for grocery, fast food, fresh fruits and vegetables and apparel among others.

2. AV Birla Group acquires Hyderabad-based supermarket chain Trinethra Super retail.

In the new year, the AV Birla group has kicked off its retail plans by acquiring Hyderabad-based supermarket chain Trinethra Super Retail and its fast-growing online shopping outfit, Fabmall. Trinethra Super Retail was founded in 1986 and is southern India's fastest growing grocery retail chain. While the Trinethra brand is used in Tamil Nadu and Andhra Pradesh, in Kerala and Karnataka, it is known as Fabmall. Trinethra is scheduled to open stores in tier II cities such as Mysore, Coimbatore and Tirupur. The group also has warehouses in Hyderabad and in the states of Karnataka, Tamil Nadu and Kerala. Currently, the Trinethra supermarkets offer groceries, fresh fruits; vegetable and diary products; bakery, frozen foods and many have food counters / pharmacies attached to them.

Although the financial details of the Birlas’ retail business isn’t clear, it is said that the group would pump in Rs 5,000-Rs 6,000 crore at least in the initial phase, which could be subsequently ramped up once the business grows. Birla TMT Holdings, an unlisted company, is likely to part finance the investment, while some debt could also be raised. The Birla group, via Birla TMT, has raised close to $980 million through the sale of about 33% of its equity stake in telecom unit Idea Cellular, to about six private equity firms.

Relevant News :

1. Reliance acquires Adani Retail

2. Trinethra: Birla's first retail takeover

3. Birla group may pump in Rs 6,000 cr in retail initially

Finer print of Bharti, Wal-Mart JV

Bharti's joint venture with Wal-Mart for cash-and-carry will be 50:50 one, with a condition that if any startegic or financial investor were to be brought in, then both partners will dilute stake equally.

The present policy restricts FDI in retail to single-brand ventures, with a cap of 51%. However, 100% FDI is permitted in wholesale cash-and-carry, where one can sell only to retailers and distributors, and not to the customers. besides, 100% FDI is also allowed under the automatic route inwarehousing services and refrigeration of agricultural products. While Bharti retail will enter into a franchise agreement with Wal-Mart for front-end retail, the two companies are forming a joint venture for the sourcing and cash-and-carry business. The first retail store under franchise may be opened on August 15 next year.

Bharti required the technology and the expertsie in logistics, supply chain management and cold chains and also needed to link up with the suppliers and producer communities and the tie-up with Wal-Mart would help towrards this.