Article

Business Review, 1 Февраля 2003

A Super Labor Market

Retail trade employees will be fiercely fought over in the coming labor crunch.

The capital’s retail trade industry is rapidly expanding and the employment market is seeing unprecedented growth. When the two collide, they produce a boom that is leaving both retailers and recruitment agencies struggling to keep up. According to State Statistics Committee figures, retail trade turnover reached 3. 719 trillion rubles ($117 billion) in 2002, a 9.1 percent increase over the previous year. The market research company Interactive Research Group, using data supplied from major retailers such as Mars, Pepsi-Cola, Sun Interbrew and other companies, put the growth higher, at between 13 percent and 15 percent.

According to research conducted by Renaissance Capital investment bank, Moscow accounts for 30 percent of Russia’s total retail trade turnover. Moreover, the proportion of trade conducted in supermarkets and trade centers has grown from 4 percent in 1999 to 12 percent in 2002. While this figure is low compared to those of other developing markets, such as 18 percent in Poland or 36 percent in Brazil, it is expected to rise. Renaissance Capital estimates that 10 to 15 large retail chains will capture 30 percent of the retail market in the future.

The consulting company A. T. Kearney, in conjunction with leading world retail firms, has created the Global Retail Development Index, which ranks 30 developing markets in terms of their attractiveness for retail investment. Russia was ranked fourth in the survey, after China, Slovakia and Hungary.

Monthly wage levels for a selection of fast moving consumer goods sector professions, in US$. The survey onvolved 55 companies, 11 of which are Russian. All wages are pre-tax. ANCOR

According to figures published in Delovoi Peterburg, since 1999, retail turnover in the majority of European Union member states has fallen by 0.5 percent to 2 percent per year, which has only enhanced the attractiveness of Russia’s retail market.

The local market has indeed been attracting its fair share of international retailers. In the last several years Moscow has seen the arrival of the IKEA, Metro, and Auchan retail chains, with the addition of Spar, Real and VETA expected this year. Combined with local players such as Sedmoi Kontinent and Perekryostok, the total current planned investment in trade center construction in the capital should reach about $3.5 billion, Deputy Mayor Valery Shantsev said in an interview on the Govorit Moskva radio station in January.

Meanwhile, the labor market has been tightening. The State Statistics Committee reported that unemployment had fallen year on year by 18.4 percent to 7.1 percent according to International Labor Organization methodology. The Moscow City Employment Agency late last year had registered a drop in the unemployment level to under 1 percent, one of the lowest in Russia, leading to a general labor shortage.

“A good example of this is that a year ago, magazines such as”Iz Ruk v Ruki,“ “Rabota i Zarplata” and “Rabota Segodnya” were made up of half announcements from people looking for work, and half advertisements from companies looking for personnel — now these magazines have, in fact, become magazines solely for companies looking to hire employees,” said Natalia Dolzhenkova, moscow commercial branch manager at Kelly Services.

If the general labor market is tight, then the retail-trade labor market is being severely squeezed. Colliers International estimated that last year alone, 630 000 square meters of retail space were added to the Moscow market in the form of trade centers and all this space needs to be staffed.

“The arrival of the large Western chains on the local market has, without a doubt, had an effect on the labor market,” said Olga Berezovskaya, a consultant at the FMCG department at the ANCOR recruiting company. “Their presence creates fierce competition on the labor market, leading to an inevitable deficit of qualified retail staff.” Irina Avdonina, key account manager at the Manpower staffing agency, concurred.

“Everything is very dynamic, the lack of retail specialists is obvious, and if these Western retailers, which are not on the market yet, but have indicated an interest in Russia, such as Wal-Mart, arrive, then it will definitely become extremely dynamic.”

Finding staff has been a tricky problem even before the arrival of the major international retail players. Modern retail has had a brief history in Russia and so, naturally, experienced employees have always been hard to find. Many companies turned to the large Western companies that were involved in importing and producing consumer goods in the mid-’90s.

“It was the natural solution as Western retailers having wide recruitment needs considered candidates from Russian retailers on one hand and Western companies on the other since they could not find enough already trained specialists,” Avdonina said. “They were taking sales supervisors, key account managers, etc. who worked with foreign clients and possess knowledge of Western business and corporate culture.”

When the large Western chains started arriving in force several years ago they already had a wider range of options in their search for retail talent. One of the easiest was poaching mid- and upper-level employees, such as store and floor managers, from their Russian counterparts. Vedomosti reported in January that the commercial director of the Lenta supermarket chain in St. Petersburg, Andrei Smetsky, sent a letter to the Moscow office of Metro complaining of dirty tactics in their headhunting safari.

“What irritates is the way they did it: They call people on their mobile and home phone numbers, talked with their relatives,” Vedomosti reported Smetsky as saying. “There are a lot of accusations in the press about how recruiting companies together with the large Western chains are taking personnel from Russian companies,” said Avdonina. “It, of course, is only natural to expect this [complaint], because these Russian companies spent a lot of time and money on training and retraining their employees and they suffer when a recruiting company attracts away their specialists. This had a very big resonance on the market.”

All the same, the existing specialist base has not proved sufficient to meet the demands of the market and the major Western retail chains have had to ratchet up their training in response.

“Western chains understand, that to gather the number of specialists needed is very hard, so they have to choose a different way. They hire inexperienced, but promising, young people, and train them to the company?s requirements,” Berezovskaya said. “In this way, after a period of time, they get their specialists.”

Not only are management specialists difficult to find, but even the more traditional specialists can be difficult to locate.

“When you are talking about retail, then you are talking about, for example, butchers and bakers, fruit and vegetable specialists. It is terribly hard to find these people,” Dolzhenkova said. “Usually these people work close to where they live, they do not travel far from their home, they do not read the job-offer publications, they just use connections, an acquaintance. They unfortunately do not know what a resume is about. These people are professional, they are very good and have a very high level of skills, but how to find them is a very big problem.”

With staffing agencies seeing no let up in the demand for retail staff in the next couple of years and Finance Minister Alexei Kudrin’s warning in late January of labor shortages if growth in the economy exceeds 5 percent, retail trade employees seem set to reap the benefits.

“What we are seeing now is just the beginning,” Dolzhenkova said. “This is not the peak, we cannot even see the peak yet.”

Nathan Toohey