The number of professionals being laid off or furloughed in fashion retail is growing by the day. Macy’s, Gap, Kohl’s, JCPenney, and H&M are examples of only a few of the retailers that have taken the hard decision to let people go, to stay alive. The situation is really tough and a recent report by Forrester predicts that due to the coronavirus pandemic, global retail sales will decline by an average of 9.6 per cent in 2020, marking a loss of $ 2.1 trillion. The survival strategy for many has been to reduce cost of operations to the minimum, and one of the biggest components of cost is the salaries.
In the initial phase when the markets started to close down, it was the front-end staff at retail stores that were hit the hardest. But as the days of closures increased, professionals across all departments of retail from design to buying to sourcing were under the scanner. By the first week of April, over 700,000 retail workers across the globe had been either laid-off or furloughed. In April, retail sales in the US alone plunged 16.4 per cent, following the historic loss of 20.5 million jobs in the said month.
But that is not the full picture, and the reality is that some of the retailers will not reopen, being pushed into liquidation by the crisis. Many others are expected to significantly downsize their store numbers, and hence, workforces. Further, creating uncertainty is the fast shift from offline to online retail, meaning more jobs in retailing will move to distribution and customer service centres rather than bricks-and-mortar selling floors. Also, the debate is on as to who are the critical people in the fashion supply chain – designers, buyers’ merchandisers, sourcing professionals, warehouse executives or front-end store staff.
This evolving scenario is creating new challenges and if ever fashion retail needed to make smarter decisions, that time is now! In the choice between layoff of Buying versus Sourcing professionals, in the current situation, it seems the sourcing teams have been on the wrong side of the fence.
The buying team versus sourcing team debate
Among the various departments in fashion retail, the two that are very closely linked are the buying and sourcing teams. In this crisis, if a company has had to take a call to layoff, it has in most cases gone against the sourcing teams. The understanding is that the most critical function for retail is buying or rather the understanding of what to buy, and during crisis, most organisations will be looking at what minimum is required for business survival. It helps that in most cases, buying teams can do sourcing also. The sourcing value-add will be to get the best cost and delivery for better margins. But at this time, it’s not about margins; it’s about just surviving!
It is also important to note that it is the sourcing team which is responsible for ensuring that compliances and sustainability norms are adhered to. The sourcing teams have gained importance in the last decade because of the increasing focus on fast fashion and ethical sourcing. However, now that the focus is more on getting the businesses on track, hence in cases where priorities need to be set, the hit is on the sourcing team. This, however, is a temporary phase and retail experts are confident that sourcing experts are critical to operations, and once the business is on track, the first professions to be called back will be the sourcing teams.
The Indian retail scenario…
While most sourcing professionals says that the Indian retail scenario has been pretty balanced in layoff of its people with almost every department affected, they almost unanimously agree that if there is a choice to be made, the buying team is considered more critical to operations as they decide on what should go to the shelves, or simply put, what will sell. On the promise of anonymity, a very senior sourcing expert shares, “Buying team is the one who would be entrusted with sharpening the product lines and bringing something apt for the consumer. They would be very much required in the future scheme of things. On the other hand, sourcing team would perhaps have a lot less to source (sales projections are a lot reduced vis-a-vis last year) and with drastically reduced volumes, you need fewer team members.”
While most of the bigger retailers in India have not let go of their people, the smaller ones are faced with the dilemma. Preferring not to be quoted, a senior sourcing professional shared, “Struggling retail organisations are taking such hard calls on the people in souring department because of anticipated volume drop, inventory correction, operational cost reduction, etc. However, this may not be the case with stable organisations.”
Adding to the thought, Rajesh Lalla, VP, Reliance Trends, while stating that they have not faced the situation, says, “Cost cutting is happening across the board in some companies’ basis reduced demand. Since buying decisions would be really critical at this juncture, for companies that have/had to make the choice, it was the sourcing guys who took the hit more. It is just a question of who could be more important in the next 6-8 months or so.”
The general thought process is that vendors are going to be idle, hence excess capacities would be available at sharp prices, so two important aspects of a sourcing profile are automatically addressed. One doesn’t need too many people. Also, since there will be no travel in the near future to cut costs and from safety perspective, vendors would be coming over through virtual meetings, so no new launch styles. This, in real-time, means mostly core styles in production in the near future, which can be done with less sourcing professionals to handhold through the process. With leadership now taking a lot of decisions, even operational ones, less team members are required.
Scarcity of talent for international sourcing profile
Most agree that sourcing teams are often not given their due and considered as the middle layer that is helpful, but not always necessary, especially with smaller companies. But not everyone feels that sourcing teams are or will be at the receiving end in the choice of layoffs.
Heating up the debate, Shirish Srivastava, Head of Apparel Sourcing, Puma India, argues. “I don’t think this is true for established brands or brands which have global presence. Sourcing needs experienced people and no one wants to let them go. It is a sad fact that the next generation of Niftians is not interested in sourcing, so you don’t find good resource in sourcing easily. It’s very heavily loaded at the top where you have Niftians from 1995 to 2003 batch at the top and middle management. But beyond the middle management, it’s crisis of talent,” he concludes, adding a new perspective to the debate.