The Contribution Of Human Resources To Change Management “Special Cases For Retailing Industry” Essay, Research Paper
The Contribution of Human Resources to Change Management
?Special Cases for Retailing Industry?
In this paper I will examine the latest trends in ?Retailing Industry? among the world and in Turkey, and then examine the role of Human Resources in the changing environment of retailing organizations. The presented information is vital for every same kind of existing firm.
Trends in Retailing Industry and General Outlook
Retailing is the fastest most dynamically changing segment of industry today. Fierce promotions, aggressive competition, expansion strategies, changing demographics and complex just-in-time distribution systems are just several elements of the change.
Consumers are more value conscious than they have been in the past. The shopping habits have shifted. Many of the consumers can find the same items in different prices, and prefer the lower priced one. Consumers are much more value oriented at present.
With more working women in the workplace, they have found little time to do shopping. The time for shopping is much more limited, as a result, convenience has become an important concept and internet or electronic commerce and mail order companies are doing brisk business as a consequence of the two-working adult family households. Thus, besides the e-retailers, classical bricks-and-mortar retailer started to utilize World Wide Web activities.
Retailers are using more and more technology to enhance efficiency and low costs. This will reduce bloated inventories, improve purchasing and forecasting, and reduce out-of-stock problems.
Retailers have realized that data base marketing can be a competitive tool to retain customers but also to communicate better with those customers. This has proved to be a very effective tool since retailers can segment specific offers to specific customers. So the industry is becoming more and more customer oriented.
Average personal income growing of the people is the key driver for that sector in all over the world. The new generation (born after 1985) is experiencing tremendous growth in spending power. This will mean increased sales and profits for chains that tailor their product mix to this age group.
The retailing industry is mature and slow growing in more developed countries in the world. In USA, the more saturated industry makes the companies to do better job of managing their operations. The retailing sector is one of the major sources of jobs in the world economy. In 1999, retail sales grew to almost $ 3 trillion dollars in United States. [2] However, retailers must close unprofitable stores, locate in regions with faster growth, manage their inventory better, and create fresh strategies related to human resources.
In the long run, the only way the retail industry can restore profitability is to reduce the amount of competition for consumers? dollar. This will mean continued consolidations, divestitures, and bankruptcies of smaller regional retail players. On the other hand, in 1997, the merger between OfficeDepot and Staples was nixed by Federal Trade Comission because it would have meant less competition in the marketplace and higher prices for consumers and business. [1]
In response to increased competition from new market participants, retailers are exercising a full array of strategies, including downsizing and restructuring, changing their merchandise mix, adding services, and adapting ?quick response systems? for controlling inventory management costs.
Sociological developments, increasing income statements, increasing number of credit card holders, diversity of products, and modern shopping centers raised the market shares of big retailers from 9% in 1995 to 31% in 1999. According to the estimation the total market share of Carrefour, Migros, Tansa?, Yimpa?, and Gima will be above 50% by the year 2003. [12] The annual endorsements of these five companies are above 250 million USD, and in year 2001 they seem to dominate the retail sector by being top fives in the industry. The competition will be among them in the future.
The huge growing rate of these stronger retailers increased the demand for the suitable human resources in the sector. Every single opening retailer requires an average of 20 personnel, and the total requirement for one firm is above 500 for one year. [14]
As we see, the growth strategies of the retailers are coming from the idea of being the first in the sector, but the competitive environment does not let only one to be the number one in Turkey. We can also recognize the affect of globalization about that issue. As a result of loosened borders, the local firs meet international rivals to compete with. This is a huge pressure for all retailers to be more qualified in order to cope with them.
Pressures Affecting Retailing Industry
Changing Consumer Requirements
Consumers are demanding more, and yet expect to pay less. Too many stores are chasing too few consumer dollars. And new competitors are entering the market everyday.
Working women require much more convenience in their shopping activities. They may prefer to buy the goods according to the convenience, such as e-commerce, catalogue retailing, and so on.
Consumers are much more value oriented. Retailing is not simply selling the product, they look for quality of the service, for the pleasures, behaviours of salesmen, or even for entertainment.
Internet Shopping
In recent years, more consumers have chosen to shop online for their needs. This is a growing trend that may impact specialty retailers tremendously-particularly among those that sell smaller unit value goods. The most popular categories that consumers have used to shop online have been books, CDs, movies. [1] However, more on-line stores are being formed daily which only increases the competitive dynamics of the retailing industry. Some online retailers have begun merchandising traditional hard goods such as toys (i.e. eToys) and baby products (i.e. eBaby). Traditional retailers may have to respond by developing their own competitive online sites to compete with these new merchandising forms.
Thus, traditional retailers may have finally recognized the potential of internet commerce and its impact on their business. Initially, retailers had just a web site that was more for informational purposes than e-commerce transactional purposes. However, beginning in the year 2000, several retailers will devote more time to developing full-blown e-commerce sites. Most notably, Walmart Stores launched a major e-commerce program in the year 2000. [2]
What’s more, it may surprise many Canadians to learn that we are adapting to the Internet more quickly than our American cousins. About 30 per cent of Canadian households are already online, compared to 22 per cent of American households.
Seven years ago, virtually no households were Internet enabled today, the Retail Council of Canada estimates that nine million Canadians, representing 30 per cent of our entire population, are surfing the Internet. By 2003, nearly 65 per cent of us will be online. By contrast, cellular phones took 13 years to reach just 25 per cent of North American households. [16]
In 1999, 1.4 million Canadians spent over $1 billion online. Estimates are that about seven million Canadians will spend $13 billion by 2003.
A recent report by Pricewaterhouse Coopers estimates online sales currently account for less than one per cent of total retail sales. That doesn’t seem like a lot. However, by 2003, e-retailing is expected to account for five per cent of all retail sales. The trend is obvious.
In response, major retailers are making huge investments in e-retailing. (It costs about $US 40 million to develop a leading edge e-commerce site and over $US 50 million annually to maintain it.) [16]
For many retailers, their continued success is due to adopting a “click and mortar” business model. This model fully integrates the Web site with the retailer’s stores and distribution centres. As a consumer, you can log on 24 hours a day from the comfort of your home and view a wide range of products. You can then decide whether to buy online or jump into the car and drive to the nearest store.
The click and mortar strategy seems to be working for Future Shop. Although they expect phenomenal growth on their online retail sales, they do not expect their retail stores will become redundant.
Competition
The retailers today, are responding to external competitive pressures at a pace unmatched in history.
Meeting consumer demand for high quality products at affordable cost is a challenging undertaking for retailing business, as customers are seeking for cheaper with same quality. But, as it described in the trends part, convenience is also a major factor for the consumers.
The e-commerce arena is highly competitive since there are no known barriers to entry. However, we feel that most e-commerce consumer retailers will eventually go out of business or be acquired. Large retailers have the financial ability to enter this segment, make large initial investments, and accept non-economic returns to establish presence. In fact, many venture capital firms have shunned e-commerce retailers they once supported. Many e-retailer stocks are selling for mere pennies on the dollar. Investors are more sophisticated and scrutinising each and every stock choice by looking at factors such as management team, business models, competitive intensity, and consumer dynamics. E-retailer profits are non-existent because of web site infrastructure, order fulfilment, and marketing.
Even though the Internet is having an impact on shoppers, Mr. Annand said he believed the scope of shopping on the Internet is limited.
“Customers like to see a product, touch it, try it on and compare it to other products before making a decision to purchase,” he said. “However, as younger customers who are born and bred on the Internet become a larger share of the population, the impact may become greater.” said Doug Annand. [16]
Economy
All retailing industry sectors are heavily dependent on consumer spending. Since, consumer spending represents a huge part of the economy these retailers become extremely vulnerable to wide economic swings.
However, Turkey, a present developing country, contains more potential demand in general for investments in the retailing industry. Although the very well known Asian turmoil in 1997, and Russian crisis in 1998 affected Turkish economy in that years, investments and developments in the retailing industry had been still going on in our country. In 1998 the industry had grown 4% relatively. [1]
Mergers and Acquisitions
Consolidation amongst retailers is a major trend. Understanding all the pros and cons of a business transaction can be daunting. By structuring capital, borrowing properly, and choosing the right treasury structure, business challenges may be resolved.
At present, small retailers, covering approximately 50% of all industry, are the most damaged ones in such a technological and competitive environment. Some of them are captured by the huge retailers because of the very reason. The retailers try to grow more and more in order to be strongest in the tough environment by increasing the number of their branches. Small ones lose their competitive advantages, and we witnessed mergers among them to survive. It is important to note that the expense of opening a new store is prohibitive and risky where the return can not be measured accurately.
Technology
As technological innovation continues to increase at a breath-taking rate, the requirements of the retailing industry are constantly changing. To address these needs, retailers should expand their service offerings to their customers on a grand scale.
Technology is used for both increasing the efficiency of retailing business, and serving the customer.
Developments in IT is provided Systems Integration to reduce the risk of single suppliers and is a continuous IT interaction of suppliers and retailers. Also, there are applications of data mining and data warehousing to control the inventory just in time. Some retailers need consulting services in the areas of identification, coordination, integration, delivery, implementation and lifecycle support of diverse hardware, software and network components.
Information technology also gives the opportunity of being more customer oriented for retailers. Using appropriate database of customers, promotions may be special and different according to the consumers? habits, by using internet technology.
E retailing is the other dimension for bricks and mortar retailers in the present trend of the sector.
Developing Retailer?s Change Strategy
Customer oriented vision and One-to One Marketing.
Many retailers keep detailed information on customer shopping and buying patterns to deliver the right merchandise at the right time. One important way to call a customer data base list is through a mail order catalogue. Retailers have realized that data base marketing can be a competitive tool to retain customers but also to communicate better with those customers. This has proved to be a very effective tool since retailers can segment specific offers to specific customers. In addition, many retailers have instituted rewards cards for frequent customers to reward them with special discounts when entering the store.
“Customer service is the heart of Saturn?s culture,” said Van B. Honeycutt, CSC chairman, president and chief executive officer. “Our team brings that same commitment to Saturn, building a next-generation system that enables Saturn to support and serve customers better than anyone else.” [8]
Market focusing structure changes the organization towards concerning more about the customer. In order to achieve that, the firms? employees have not only functional duties but also the information relevant to the change. They should follow the changes in the environment, and offer the best for the customer. Customers should meet the offers that they have never thought about or they are not aware of. This means, every employee must be aware of what is going on around and what are the trends in the transition process of the retailing industry.
Reynolds will integrate external information with data from inside the dealership to help retailers create personalized, one-to-one marketing programs for individual customers. The end result, according to Mark Brown, general manager, Reynolds? eBusiness Division, will be a “win-win-win” opportunity for consumers, retailers and manufacturers.
“Retailers will have the power to better manage the customer relationship lifecycle, helping retailers find, better serve, and create lifelong relationships with customers,” said Brown. “Consumers, in turn, will benefit from more personalized, targeted service from retailers, while auto manufacturers will benefit through increased customer satisfaction and brand loyalty.” [5]
The customer-oriented vision is the cornerstone for all strategies. It should be made relevant and actionable for every employee. This global vision for whole business should get the acceptance and be implemented in local conditions successfully.
Investment at Right Place
In Turkey the most competitive cities for retailing firms are Istanbul, Ankara, and Izmir. Thus, within the borders of change strategy, it will be more sensible to open new stores in less competitive places.
The only things to achieve success are not opening hundreds of supermarkets or mergers with foreign partners. Today opening supermarkets in megacities may dissatisfy the investor within a few months. Thus, investing in Anatolia is much more logical says Murat ?ahin, General Manager of RMS Consultancy.
Developing Own Web-Site
It has taken only a few years for online shopping to morph from a geeky way to buy books and software in to a business phenomenon that?s shaking the structure of the entire retailing industry ? and changing the buying habits of millions of people.
On-line commerce is more of a complimentary business of traditional retailers rather than an entirely new retail concept. It’s believed that retailers that have a dual presence- both physical and online- will have a competitive edge.
Brick and mortar shops should develop their own web-sites to be competitive in the industry. One way retail centres could respond to increased Internet shopping is by adopting a format similar to the catalogue stores. This means stores would become smaller with less storage, less staff and possibly lower operating costs. The reduction of floor space would, in turn, affect future retail trends in real estate.
“This is all about taking care of the customer and offering them more value,” said Cynthia Trudell, chairman and president of Saturn. “Our system is a prototype within the GM organization, demonstrating how technologies like the Web can expand our range of services and help us stay closely tuned to our customers.” [8]
In Turkish retailing sector the competition is now increasing in the virtual world. Migros has the advantage of being the first mover, currently capturing 70% share in virtual retail sector, but Tansa? is coming with a competitive web-site. The firms will utilize the advertisement revenues with the improvement for e-commerce in Turkey, which will increase the profit margin and by the way decrease the prices.
Investing in Technology
“The explosion of Internet technology has created significantly greater opportunities for car companies and auto retailers to attract and retain consumers in the vehicle ownership cycle,” Lloyd “Buzz” Waterhouse, Reynolds? president and CEO, said.
There are leading provider of integrated information management solutions to the retailing marketplace. Consultancy services include a full range of retail and enterprise management systems, networking and support, e-business applications, Web services, learning and consulting services, customer relationship management solutions and leasing services.
In order not to miss the opportunities related to information technology, such as increasing efficiency with data warehousing, or reducing costs with internet, the firms should not hesitate to invest in technology. That also requires a huge investment in relevant human capital with experience about that issue. The alternative way to outsourcing or merging with a e-commerce firm.
Investing in Training
Every employee should be well trained according to the requirements of the work. The return of such an investment is risky but it is also crucial for the fir to be successful.
There is a good example of a training application in Turkish Retailing Sector. This is a corporation of Ko? University and Migros. [11] Both the university and the retailer is related to Ko? Group, and they utilize that situation. Ko? University ? Migros Retailing Education Center (K?MPEM) is opened in December 2000. K?mpem is offering a retailing education for today?s and future?s executives including the course of Strategic Human Resource Management.
Providing human resources committed to achieve the corporate vision is the other dimension of such a training.
Corporate culture
Corporate culture and relevant strategies should also be a part of training for all employees related to their job title in the firm. The change is actually in the mind-set of the employees. This is the concept of working locally under the light of a global vision.
Changing the culture in the transition period is the real challenge, and culture can not be changed by only training. HR management has responsibility to help the members of the firm to understand the vision and mission of the firm. The steps of the strategy must be clearly defined up to a required level for the employees.
For instance, if the firm is bringing e-retailing business, there will be recruitment of people with experience. While they are developing the system for the virtual type of retailing, they will require the experience of employees already exist in the firm. Because, the new comers will probably be stranger to the marketing applications of the firm.
?The dot-coms might know everything about building a site, but they need retail experience,? says Peter Sheinbaum, president of AlexBlake.com, a hosiery e-commerce retailer based in Los Angeles. ?Traditional retail people are so valuable because they bring a wealth of retailing knowledge.?
Creating collaborative members of teams in corporate culture make both sides stronger. Both sides benefit from each other?s experiences on the way of achieving same result.
Human Factor in Value Chain, and Creating Specialists
It very obvious today that, all firms that have activity in service sector need specialized human resources. The most important factor of achieving competitive advantage in such a tough environment is the right human capital.
?The difference is human?, ?We should not make the same mistake because? there are some many different mistakes to do? says Migros Turk Human Resource Management. [11]
In order to provide more value-added services for the customers specialization in different issues is important. This is not specializing in product variety of course, instead, being generalist in product diversity is much more acceptable in that sector. Because it creates more value for the customer and increases the convenience. However, there should be specialization about the type of the business within the firm. For instance, the same executives can not deal with the brick and mortar type of the business and the virtual side (if applicable) of the business. There should be specialists for each type of activities.
Performance Focus
An important performance measurement in the retail industry is same store sales. Same store sales are defined as sales at stores that have been opened at least one year. Same store sales provide an important gauge on which to compare the growth of established stores. If same store sales are rising for a retailer, it may indicate that the firm has enhanced its production, warehousing, purchasing, or promotion efficiency. Declining same store sales may be an indication of poor physical distribution management or an economically declining geographical region or locality. [2]
Another important barometer of a retailers success is sales per square foot. The higher a retailer?s sales per square foot the more efficiently their stores are being used to generate additional sales dollars. This is why it’s important to use a high level of automation to gauge sales by product, sku, and color to stock merchandise that sells very well. [2]
The retailers must do a good job of managing their inventory levels, personnel needs, and style/fashion trends to ensure they will not lose consumers? businesses.
The Role of Senior Human Resources Personnel
Recruitment
At the moment, recruiting new graduates and training them for the future is ok for brick and mortar retailers. But, if the company is in the process of starting online retailing, then the firm should require a little bit expertise. Recruitment of experienced IT employees is a tough issue for HRD. The e-commerce employees should be applied online for relevant positions in the firm.
?The old job won?t go away, but demand (to fill it) is down, especially in relation to the incredibly high demand for e-commerce retail executives,? says Chuck Pappalardo, C&T managing director of the venture and technology practise in San Francisco. [18]
As these developments continue, hiring at the executive level has become more active. Traditional retail and wholesale grocery companies are assessing their hiring needs and adding managers in selected areas. At the same time, senior executives at companies that were bought out or being squeezed out are reading the handwriting on the wall and putting themselves in play.
“People who sense that something will happen to their companies are starting to market themselves so they can be in charge of their own destinies,” says Barry Cushing, president of Roth Young of Tampa Bay Inc., a recruiting firm specializing in the grocery industry. For these executives, the timing is right. Smaller chains seek proven leaders to help them compete with the giants, while some larger companies want to fill gaps when their managers leave for jobs at smaller companies. [18]
Opportunities at the highest levels of grocery retailing or wholesaling are limited because of merger-induced layoffs as well as the industry’s long-standing policy of promoting from within. Boise, Idaho-based Albertson’s, for instance, rarely hires outsiders for senior roles. Instead, it extensively trains and moves up managers internally, says Steven Young, Albertson’s executive vice president of human resources.
Particularly hot positions are vice presidents and directors of finance and information technology and merchandising, says Mr. Okyn. Grocery companies are eager to hire candidates from mass merchandisers, such as Wal-Mart or Target, because they “bring a different perspective and vision to their businesses,” he says. [19]
Compensation
There should be a bonus system not according to years of experience, but according to the continuing amount of impact of the employee to the organization.
Another criteria should be the role accountability of the employee and his/her weighed responsibility while performing his job.
Rewards should be prepared for according to the performance of the employees, and they should encourage the people.
Reward everyone contributing to success — not just senior management. Senior management may be responsible for creating strategies, but its those on the firing line that get the job done. Perfect strategies, poorly executed will fail.
Rewards are more than money. A Total Reward System of money, recognition, promotions and quality of life and work should be part of the package, all based on an objective evaluation of performance based on achievement of strategic milestones. [10]
Career Opportunities
It is difficult in Turkey to handle well-educated people to work for retailing industry in the long run. There was a general misconception of retailing such as saying, ?I did not go university for being a retailer!? Thus, here the role of senior HR personnel is very important to convince the employee to think the job for long term and understand the job as a good career opportunity.
?Actually, in recent years, retailing is becoming a more professional career. There are huge investments for training in that industry. People are asking themselves what they will learn if they are employed to the industry. Within 5 years retailing industry will be one of the most important industries for good career opportunities.? Says Mr. ?ahin, General Manager of RMS Consultancy.
HR seniors have also the responsibility of convincing candidate employees about their possible career.
Performance Management:
It will be necessary to design a performance management system that is inside the borders of the global vision of the company. The measurable objectives should be set according to the mission of the firm, and then employees should be guided for accomplishments of the objectives. At the end of the period, assessments (with self-assessments) are provided.
The assessment determines the incentive pay, and also point out the development requirements.
Communication is very crucial in performance management, as the consequences of the assessments should be two-way communicated to be effective. Otherwise, people can not understand what is going on, and the performance management wouldn?t be effective.
Training the front-line
Training of the front line is very important in Retailing Industry, since they are the people who interact with the customer first. HR department should provide such training for the front line. They should reflect the vision and culture of the company.
Thus, giving enough authorization to front line is the key. The hierarchical decision process should be minimized in the interactions with customers. What I mean is, the front line should have the power to make decision in a matter with customer, and he/she has to try to satisfy the customer. Although there may be wrong decisions and very small loses at the beginning, in the long run it will bring customer loyalty to the firm.
Summary
In this paper I have followed retailing industry progress through the world and Turkey, giving examples of some cases. Human Resource Management has the key role in transition period, both as a strategic planner and as an initiator for the implementation. I examined HR processes including recruitment, training, performance and career management, etc.
Bibliography
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