Today we bring to you the article on one of the hottest topics around: E Commerce boom in India. This article, written by XLRI Jamshedpur students, explains it from a strategic HRM perspective.
E Commerce Boom in India
The e-commerce sector is gaining pace in India with early movers expanding their portfolio and striving
towards more customer centricity. Private investors have instilled faith on e-commerce and poured $2.3
billion providing them the financial firepower to give brick and mortar stores a run for their money.
Challenges Faced by E-commerce Players in India
- Recruitment: E-commerce is becoming a haven for job seekers with 1 lakh temporary positions being added in the quarter ending December 2014. Demand for temporary workers shoots up during festive seasons because of increase in customer orders. E-commerce players like Amazon, Flipkart, Snapdeal and CaratLane are pioneers in hiring temporary employees who are mostly involved in delivery, warehouse, online marketing and customer services. Staffing companies expect that the hiring of temporary workers will grow at a steady 60% for the next three years.
- Tapping a huge customer base of Indian consumers who use internet primarily for other purposes like booking tickets, downloading video content etc.
- Increase in salaries: The salaries of delivery boys at the entry level has increased by 100% while that of the remaining temporary workforce catering to the e-commerce has gone up by 60%.
- Attrition: According to Randstad, a staffing company, there is a very high attrition of as high as 100% in delivery.
- Existing infrastructure and supply chain constraints
- Customer payment defaults or absence of customer during delivery: India does not have standardized street address systems and road conditions are rough. Most of the times, a street, building name and series of landmarks are needed to locate a house and customers are required to be at home to receive a package.
Threat from Competitors
To counter the threat from online book stores like Amazon and Flipkart, traditional brick and mortar stores
like Marks & Spencer are beefing up their presence on the digital platform and changing distribution
channels. But, this approach did not come without problems for them. Many of their shop assistants were
irked as they were the ones who put in all the hard work of advertising a product to a customer, and then
the customer goes away and eventually makes the final purchase on the website which in turn leads to them missing out on their targets and subsequent commissions.
To counter this threat, M&S ensured that all the teams could together claim credit for an online sale. This initiative came from the HR department as it served as a strategic business partner aligning the employee behaviors to the organizational goals. M&S is also focusing on consistent customer experience through an in-house store.
Strategic HR Initiatives
HR can play role of a business partner to mitigate the risks cited above. HR should sit with the leadership
team comprising of line managers to clearly define products, services and model of delivery of the business.
Specific roles and responsibilities should be defined to drive business results which require unique skills and knowledge of the e-commerce business in its entirety. HR managers have to build organizational capability to embrace and capitalize on new business opportunities. For example, to overcome recruitment challenges, they can partner with various staffing companies like Manpower, TeamLease, Randstad, Kelly Services, Global InnovSource etc. to source contractual manpower during festive seasons or otherwise. These staffing companies are efficient and well equipped to fulfill staffing requirements. Other initiatives that can be taken by HR are:
1. To tap the huge customer base, HR managers should look for tie-ups with government-owned
portals which can provide access to a database of over 21 million consumers. The IRCTC portal is one
of the largest e-commerce sites in the entire Asia-Pacific region and partnership with them will help
to sell their products through IRCTC portal.
2. E-commerce companies should look to fill up back end positions with temporary workers (less skilled,
workers from small towns or women looking to re-enter the workforce) which will require less
training and are easily available in market (low uniqueness and low strategic value in the Lepak and
Snell model—Quadrant 3). It will help in reducing costs and reaching sustainable profit levels faster.
It also creates huge employment opportunities for the temporary workers leading to increase in
3. To combat attrition, one option for e-commerce companies is to give the potential hires a realistic
preview of the new job. Second, since the delivery boys are sent to new localities every day, their
burnout rates are very high. But, if they are sent to same areas their efficiency will surely rise and
hence end attrition.
4. E-commerce players should come up with a mechanism where customer alerts are sent by text
several hours before a scheduled delivery. Flipkart has a lab dedicated to improve the final stage of
deliveries from local warehouses to customers. These initiatives can be driven by HR professionals
acting as business partners.
5. HR should vouch for investments in improving current infrastructure like servers, IT platforms etc. to
cater to growing bandwidth of e-commerce sites. It will require huge investments initially but it will
increase customer satisfaction in the long run amounting to huge profits eventually.
HR Investment Strategies
HC Bridge Framework – Strategy Analysis Lens
1. Strategic Assumptions
In 2005, there were 167 million domestic internet connections worldwide. For 2015, the forecast is estimated at 2.7 billion. India had 150 million registered internet users as of December 2012 and out of these, only 2-3 million were e-commerce customers. This shows that e-commerce definitely has a bright future globally and more so in an emerging economy like India with a growing middle-class population.
2. Strategic Resources
E-commerce companies like Amazon are giving more autonomy to their blue-collar workforce including
delivery boys and truck drivers which in turn increases their efficiency and speed of operations (Quadrant 4
of the Lepak and Snell employment model). However, this advantage of cost reduction by hiring temporary workers comes with challenges of managing and motivating them. To overcome this, most e-commerce companies have their delivery staff on the payroll of a third-party company which is responsible for hiring, paying and laying off the employees. For example, eKart does 85% of Flipkart deliveries. The role of the ecommerce companies is only to train the workforce (performance variation is higher in modified Lepak and Snell employment model) and monitor service standards, not to micro-manage the other aspects of recruitment and retrenchment. This in turn also frees the e-commerce companies from the complications of strikes and political interferences.
3. Competitive Positioning
Fulfilment by Amazon (FBA) is a new service launched by Amazon in India where a client can store products in Amazon fulfilment centers and after this stage, the entire responsibility of picking, packaging, delivering and the associated customer service support and returns for these products is managed by Amazon. This can help businesses scale better and reach out to newer customers.
4. Business Processes
A flat organization structure and a young, highly qualified talent pool that e-commerce players boast of is
giving the traditional retailers a nightmare.
HR as Change Agent
E-commerce companies are also very conscious about delivery staff who are the face of the company to the customers. Hence, companies insist on them being well groomed and polite in their conversations. E-commerce companies request their partners to get a background check on their delivery staff by the police as they do not want the brand reputation to be hit by having someone with a criminal background to have access to a customer house or walk away with the day collections.
E-commerce companies can increase their popularity by launching contests on Facebook and having a blog section on their homepage to gain consumer insightsto improve services. The infographics on the homepage should be executed strategically with involvement of both the marketing and HR departments (use of data analytics and HR metrics is useful). Investment in technology such as using bar-coding to prevent pilferage is also becoming increasingly important.
Organizational Development Interventions by the HR Department
1. Health and Safety
E-tailers justify the health hazards posed by the weight of baggage that the delivery staff carry (employees
make anywhere between 20 and 30 deliveries a day and often their bags are heavy sometimes weighing up to 30 kg) by saying that once the volume of transactions increases, they can invest more in heavy vehicles like trucks to fulfil deliveries. But, e-commerce players must consider this issue more seriously and invest in logistics to counter the threat of attrition.
2. Manpower Planning and Talent Development
Lowering attrition of the blue-collar workforce and preventing fraud is high on the agenda of e-commerce
companies. Companies are trying to make the job more lucrative by investing in training of employees. A mix of classroom and on-field training is popular among major players. This makes the employees stakeholders in the growth of the company.
Amazon reports that 63% of its workforce worldwide is male. It is also assumed that a high percentage of
their black employees work in their warehouses. Moreover, according to PayScale, Amazon median
employee retention rate is only one year. E-tailers should focus more on diversity initiatives and can
introduce scholarships for minorities and women from leading colleges worldwide.
India being an infant in the e-commerce sector has problems with logistics, payment gateways, and intense competition among major players for too few customers. On the logistics front, due to problems of last-mile delivery and unreliable third party couriers, different carriers have to be used to deliver consignments to different regions of the country. Hence, e-commerce players should focus on building their own fleet of delivery vehicles.
Another issue that e-tailers need to tackle is the cash on delivery (COD) option, in which the consumer pays the company once the product is received. This is a hard problem to get around, because of low credit card penetration in India as customers still do not trust the authenticity of payment gateways. COD system creates a delay in payment for the e-tailer and during this time the company has to restock the inventory before the cash from its last sale has arrived. To counter this problem, e-commerce companies can have COD option only for low-priced and low margin products.
This article has been authored By: Aayush Goel (H13002) and Abhijit Pal (H13004), HRM 2013-15, XLRI Jamshedpur