Friday, January 4

BPOs servicing retailers suffered due to low holiday season sales

The agents at BPO companies across the country haven’t been very busy this holiday season due to low consumer spending in the US and Europe. Captive and third-party BPOs focused on servicing the retail industry in the US and Europe are witnessing flat or negative growth in call volumes due to sluggish direct and online retail sales this Christmas and New Year’s in US and Europe.

Global retail chains such as Tesco, Wal-Mart, Target and Macy’s did not see any significant upswing in retail sales during Christmas compared to previous year-end sales. Captive and third-party BPO units in India which service retail giants however say that the flattened growth was already forecast and outbound telecalling was the most impacted.

“We had hired aggressively and utilised our bench strength to the maximum. But a slowdown in the US spending owing to sub-prime crises led to flat sales growth this holiday season across retail chains in US,” says Sridhar Rathnam, director at Tesco Hindustan Service Centre (HSC), the global delivery arm of Tesco, the UK based retailer. The captive centre at Bangalore provides IT and BPO services to Tesco retail stores across the world.

A sluggish US economy coupled with decreased consumer confidence due to depressed real estate market and rising crude prices has hit retail sales in the US and Europe and is the main reason behind low spending. “The growth has been flattening this festive season in online retail sales but companies had already factored that in their business models,” says Navin Joshua, executive director at Delhi based vCustomer, which has many online retail processes.
The season after Thanksgiving, to Christmas and New Year’s witnesses brisk sales every year. The two months (November and December) account for almost 40% of yearly retail sales for many companies. But after Xmas and Boxing Day last week, the shares of many retail biggies fell on the US bourses. US’s fifth largest retailer Target Inc downgraded its sales forecast for this shopping season, last week.

As a result, Target Inc’s shares fell 2.5% to $51.16 on NYSE. The discount retailer cut its sales forecast by 2% saying it expects sales to be in the range of about negative or positive 1%, this season. The Broadway (NY) headquartered Macy’s shares were down 3.9% on NYSE post Boxing Day (December 26) while stock of Wal-Mart Stores Inc. was down 0.7% on the NYSE. Sales are however expected to pick up around Easter (March 23) in 2008.
“With decreased consumer confidence, outbound telecalling has been impacted quite a bit. We have only inbound processes so we have not been impacted as much. Nevertheless, in 2008, we will see no party taking up anti-BPO backlash as an election agenda because the economy is already in sluggish mode and offshoring can help alleviate risk,” says HTMT Global Solutions CEO Partha Sarkar. According to ComScore, growth in online sales was 19% this holiday season compared to a 25% jump the year earlier.

Most BPOs had staffed adequately for Christmas sales and were running all three shifts. But the expected call volume was below expectation. Many had cancelled a day from employees’ weekly off, in advance in lieu of payment. Others like Tesco had advised their IT employees not to move out of 3-4 kilometres radius of their home during US peak shopping season. “Many times, an emergency situation emerges which requires employees to login from home and take charge of the situation immediately. But this Christmas, it was not so,” adds Mr Rathnam.

European retail sales fell for a third month in December due to rising inflation. The US based International Council of Shopping Centers has predicted that holiday sales (which continue till about January first week) could be down below the 2.5% growth forecast. “We don’t do much online retail offshore work but the industry has been witnessing a flat growth this season. This is a short term impact of the crunch in US financial markets. It will be good news for BPO players in the long term as retail companies offshore more work to cut costs,” says Sitel BPO CEO Safir Adeni.

(Economic Times)

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