Reliance Retail (RRL) seems to be clearly emulating Wal-Mart in structuring its business model. Driving its lowest-operating cost structure further, RRL plans to outsource most of its 500,000 manpower requirements through a franchisee-managed stores model, reports the Economic Times.
A network of multiple agencies in each state would be roped in to source the front-end requirement for the business with very few employees being a part of Reliance’s pay roll.
The maintenance of each store including employee management will be the responsibility of franchisee, who will operate on an incentive and commission basis. The strategy is to keep operating costs variable and enable quick decisions on stores that would not get in the required numbers in the long run.
When contacted, Reliance officials declined to comment. However, sources close to the company said it is looking at ways of ‘mitigating the negative effects of collectivism,’ a phrase popular among the top management.
Clearly, unionisation of employees is a key concern within the group while managing such a large business. The scale and scope of managing 500,000 people directly or indirectly will to keep pace with the service sector.
An employee strength of 500,000 will make Reliance Retail one of the largest employers in the private sector. Wal-Mart has around 1.3m employees globally (associates as it calls them). Globally, unionisation of labour is a prickly issue for chains such as McDonalds and Wal-Mart.
Most of the other Indian retailers like Future Group (Pantaloon), Shopper’s Stop and Piramyd Retail have employees on their own payroll. In a service sector, industry experts say an outsourcing model would bring in costs benefits to the retailer, it would be a deterrent to ensuring a sense of loyalty and ownership among employees.
Employee costs constitute roughly 6-6.5% of total revenues globally against 4% in the Indian retail sector. With its revolving door of temporary employees, Wal-Mart has faced a lot of ire from employees and suppliers on account of its tireless cost cutting moves. Wal-Mart has built a global empire of supermarket stores across the US and into Latin America, Europe and the emerging markets of Asia. However, under pressure from the Chinese labour federation, the retailer was forced to permit branches union in its Chinese stores.