Around 900 workers employed directly and indirectly with Reliance Retail are to get pink slips. To be laid off are employees working in its land acquisition and statutory clearance teams across the country. The layoffs are the latest in a series of setbacks faced by the organised retail sector as the global meltdown affects the Indian economy. Reliance Retail is a subsidiary of the country?s largest private sector company, Mukesh Ambani?s Reliance Industries Ltd.
According to informed sources, around half the employees slated to lose their jobs are on the company rolls while the balance are with outsourced agencies providing support services. The disbanding of the teams appears to indicate that the company does not plan any major land acquisitions in the near future.
Members of the larger land acquisition team stationed in several states are tasked with identifying and acquiring land for retail stores and SEZs. The smaller statutory clearance team is responsible for obtaining various municipal and state clearances for individual retail stores commencing operations.
In response to an e-mail from FE, the company stated, ?The report on laying off 350 employees from the land team is factually incorrect.? It did not respond on the status of the outsourced employees and the statutory clearance team.
Unlike its peers, which acquire land through external agencies, Reliance retail had set up a dedicated internal team for the purpose. However, most organised retail companies have begun downsizing to cut costs and pruning employee strengths across several verticals, as earlier reported by FE.
An alternative business model being deliberated upon by Reliance Retail calls for merging various verticals?or lines of business–into more compact units. Instead of addressing all lines of business, the company has decided to develop one vertical at a time. Among the various verticals, Reliance Mart and Reliance Digital are believed to be the best performers, but as the company is unlisted, figures are not available.
The company had set an investment target of Rs 25,000 crore, but the slowdown and protests in states like West Bengal and Uttar Pradesh affected the pace of store rollout. ?Retail is a tough business and requires a lot of rich knowledge of consumer behaviour, which, in turn calls for experience and expertise. Plus, building business processes for each vertical as well as a supply chain isn?t easy,? a source told FE.
Besides the economic slowdown, the biggest problem for new entrants like Reliance Retail and the AV Birla-owned More stores has been supply chain bottlenecks. Despite this, companies have been ramping up the number of stores?to as high as 800 in Reliance Retail?s case?but procurement hasn?t kept pace.
The good news has been a softening of rentals, which have fallen by over 20% and are expected to go down by as much as 40% in the next few months.
Price of crisis
• Half are on firm?s rolls, rest with outsource agencies
• Firm says report on layoffs is ?factually incorrect?
• Most organised retail firms are downsizing to cut costs
• Company now to develop only one vertical at a time
