Sagar Malviya & Faizan Haidar, Economic Times
19 August 2024, Mumbai/New Delhi

About a dozen listed lifestyle, grocery retailers and quick-service restaurants (QSRs) reduced their employee count by nearly 26,000 in FY24, retreating from the hiring spree of the past two financial years after they slowed down store expansion rate amid weakening demand.

According to their latest annual reports, the reduction was completely led by five retailers – Reliance Industries’ retail arm, Titan, Raymond, Page and Spencers – which saw their combined workforce decline 17% or by 52,000 people. The staff count was across permanent and contractual employees and adjusted for attrition in the retail segment, the second largest employer after agriculture. These retailers had a combined workforce of 429,000 people in FY24 compared to 455,000 employees a year ago.

“There is a shortage of talent and we are trying to tie up with universities so that the industry has the option to hire. Some companies might have reduced staff due to shutting of some business, but companies like Shoppers Stop and Trent continue to expand and will require staff,” said Kumar Rajagopalan, CEO of Retailers Association of India that represents organised retailers in the country.

Consumers had started reducing non-essential spending such as that on apparel, lifestyle products, electronics and dining out since Diwali 2022 due to inflation, increase in interest rates, job losses in sectors like startups and IT, and an overall slowdown in the economy. India’s retail sales expansion slowed to 4% last year after a surge in spending across segments-from clothes to cars-in the post-pandemic period, triggered by revenge shopping.

RIL in its annual report said the overall voluntary separations in FY24 were lower than FY23 and the retail industry typically has a high employee turnover rate, especially in store operations.

“Store productivity usually happens in cycles and we have seen consumers unleash their spending post pandemic, which led to retailers expanding their network or square footage. However, if some of the stores are unviable, then management teams are now highly objective, even ruthless, and will shut stores,” said Devangshu Dutta, founder of retail consulting firm Third Eyesight. “In addition, any company planning to list would like to have healthy and lean operations, although we cannot pin-point it to Reliance in this case.”

Weak sales saw these retailers having the slowest pace of store expansions in at least five years at 9%. The retail sector took 7.1 million square feet of space across top eight cities in 2023, which is expected to dip to 6-6.5 million sq ft in 2024, according to commercial real estate services firm CBRE.

“There’s an enormous management bandwidth requirement to just get this entire ship running in the right trajectory, right direction, and with the relevant speed. We are thinking about what this company will be 10 years from now. And hence, if you want to reach there in a nice way without too much damage or bruises, then what is the kind of talent we need to have today in the next 2 years, in the next 3 years?” Avenue Supermarts CEO & MD Neville Noronha asked investors.

(Published in Economic Times)

Mall Mania, Mall Madness – alliterate as you will – it’s a phenomenon that is certainly taking over the newsprint, airtime and, quite possibly, your neighbourhood.

A study published in 2005 estimated that by 2007 over 360 shopping centres would be operational around the country, with approximately 90 million square feet. A meagre increase of 0.08 sq. ft. in per capita shopping space doesn’t seem like much in a country of a billion-plus people.

But most of it is concentrated around the big cities – Delhi and Mumbai account for more than half of the total space projected, with the other metros and mini-metros such as Bangalore, Pune, Hyderabad etc. taking the total up to 90% of the space.

One may argue that money (real estate development) is only following the money (consumers) – after all, there are more consumers and higher incomes in these major urban centres.

But why would mall developers expect Delhi’s consumers to suddenly switch en-masse to shopping in Gurgaon, where 6 malls are already active in a short distance of about a kilometre, 3-4 more under hectic construction in the same area and several more scattered around that suburb? Or why do Mumbai’s developers expect people to drive several kilometres from the suburbs on a regular basis to the centre of town to grace only their shopping centre? It is only such expectations that can explain the gold rush mentality that is overpopulating certain areas with shopping centres and malls.

While per-capita availability of A-grade shopping real estate looks really low, in certain areas we foresaw oversupply, with developers thinking in terms of “property” rather than as retail space managers.

Most shopping centre developers have carried out only cursory studies on the customer catchments that their tenants will be expected to live-off. As a result, conversion of footfall into sales is low for the tenants, except for food-courts, which are benefiting from the window-shoppers rounding off a day or an evening of roaming the malls with a meal. There is a lack of differentiation in product and service offer between the shopping centres and, with nothing distinctive on offer, repeat visits and – more importantly – repeat purchases are a challenge.

Developers in smaller towns seem to be following the same model, scaling up space or scaling it down based on the capital cost vs. expected capital gain and tenancy income. They are pitching for much the same brands as tenants as the developers in the bigger cities.

There is competition for customer traffic between the shopping centres and large stores (such as Mumbai’s newly opened Hypercity, across the street from InOrbit Mall, both developed by the Rahejas), between the shopping centres and the traditional high street, and between large format stores and speciality malls.

For the most part shopping centre development in India in the recent years has been seen as an aspiration to be fulfilled – hence, the most important factors have been the size of the shopping centre, quality of fixtures, marquee tenants who can provide the glamour or the legitimacy). The focus has been more on the “positioning”.

The business will begin maturing and will begin taking developmental leaps forward when centres are seen as commercial infrastructure to be planned with the end-consumer in mind, and to be serviced over a certain lifetime.

Until then, we can look forward to announcements of many hundreds of shopping centres, the launch of a few hundred, and the conversion of many of those into uses other than as shopping centres within a few months or years of their launch. And for investors also it might be a game of Roulette rather than Patience.