Overemployment In Department Stores

[samtam]

I've lived here long enough to probably know not to ask questions that require a logical answer. But here goes anyway:

Why do most Thai-owned department stores employ so many staff? I'm thinking particularly of places like Emporium, Central, Siam Paragon etc. In any of these there are several staff in each location with never enough to do, except form an audience to a would-be shopper. This is the more confusing on a Monday when many wear yellow polo shirts and are chatting in groups so that they are unidentifiable as staff. Neither do they seem to move out of the way when you try and look at merchandise.

I know labour is cheap in Thailand, but I just wonder how cheap. Surely it can't make continued sense to employ far more staff than are required? But maybe there is a labour law that requires there to be overstaffing, as this phenomenon occurs in so many areas of Thai businesses, such as cleaning companies - we have an army at our condo, security guards etc etc. Are owners of businesses not bothered by the bottom line?

[sbk]

According to the small retail businesses I know that also employ lots of staff its answerable in one word: shoplifting.

[eljeque]

You beat me to it.

[samtam]

Amazing. That never even occurred to me.

[bkkandrew]

In my experience, it is the staff that do most of the shoplifting....

[sibeymai]

I have a sister-in-law who until recently worked ain sales at Central Chid Lom. Her monthly salary was 5,000Bt. goes a long way to explaining how the owners can employ so many staff......and why they can buy new Benzs every year. For the priviledge of working at Central she was paying more than 1.000Bt a month to live in a 2x3 metre shoe box on the corner of Chid Lom and Petchburi Road.

Thankfully she has left Central and now earns 20,000Bt or more a month and stays with my wife and I.

Some of the Thais I see driving BMWs and Benzs may have earned it, but unfortunately it appears to me there are many who see no problem in deriving wealth from slavery.

[popshirt]

I've lived here long enough to probably know not to ask questions that require a logical answer. But here goes anyway:

Why do most Thai-owned department stores employ so many staff? I'm thinking particularly of places like Emporium, Central, Siam Paragon etc. In any of these there are several staff in each location with never enough to do, except form an audience to a would-be shopper. This is the more confusing on a Monday when many wear yellow polo shirts and are chatting in groups so that they are unidentifiable as staff. Neither do they seem to move out of the way when you try and look at merchandise.

I know labour is cheap in Thailand, but I just wonder how cheap. Surely it can't make continued sense to employ far more staff than are required? But maybe there is a labour law that requires there to be overstaffing, as this phenomenon occurs in so many areas of Thai businesses, such as cleaning companies - we have an army at our condo, security guards etc etc. Are owners of businesses not bothered by the bottom line?

Yes they seem to be in the way much of the time, it never occurred to me about shoplifting either. In the West it probably is cheaper to accept a higher level of inventory shrinkage due to shoplifting than to employ more workers than are needed for sales. And yes the salaries are very low for these jobs even at major department stores. Many of these workers are "underemployed" not just in the sense that there is not much for them to do, but because they are university/college graduates and there is no other work for them in Thailand than to sell toasters at Central (and keep an eye on shoppers). This is breeding resentment among the young work force whose expectations for suitable employment are not being met, and the economic ruling elite should be concerned that it will give rise to social problems in time. "Trickle-down" is not in the Thai economic vocabulary, and yes, in many ways these conditions are akin to slave labour even if it is white collar work they are doing!

[samtam]

Thanks for the replies. Even if the sales staff only earn THB5,000 per month, that plus a 50-75% oversupply of staff adds up to a few hundred thousand baht per month that affects the bottom line. If I was running a business I would be looking at that. I just don't understand the disconnect between making a profit, and being extremely stingy. But that may require some logic.....which is always a dangerous thought to pursue.

[Barney_the_Dinosaur]

I just don't understand the disconnect between making a profit, and being extremely stingy. But that may require some logic.....which is always a dangerous thought to pursue.

Thats why you're not Donald Trump ! He signs all the cheques.

[vegas]

I thought security guards and cameras prevented shoplifters?

The sales staff don't show enough initiative to advise you on items that you're trying to buy so what is the incentive to keep an eye out for shoplifters when they can stroll over and watch a DVD in the electricals section, or chat with their friends?

[pumpuiman]

When my wife first arrived in the US I took her to the local mall for some shopping.

We saw a jacket she was interested in and looked for some sales staff to help.

Seeing none in this department, we looked around further.

After several minutes wandering around we found a woman folding clothes, and looking ticked off in general.

We asked for her assistance.

She answered, "Thats not my section" and said we'd have to go look around over there(slight head gesture) until we found someone.

We never did.

Left the store...and my wife was amazed at the lack of service...and asked "How do they make any money"?

I love the service in Thailand...being welcomed by the cashier and staff at the local 7-11 blows my mind.

Yes, the pay sounds terrible......but I do love the service.

[Heng]

Are owners of businesses not bothered by the bottom line?

At X,000 a month, it's not difficult to get your money's worth out of these employees. As for the effect on the bottom line,... how often do you see mass layoffs here? They generally don't weigh things down much as far as cash flow goes.

As for their pay rate, it's all relative. X,000 a month is a lot to some people. I'd wager that there are more people in the world who believe that it is a lot when compared to those who think it is too little.

[Briggsy]

It's also worth bearing in mind that that 5000 Baht is for 50+ hours per week which makes it even more profitable.

[Barney_the_Dinosaur]

Friend of mine finds a comely shop assistant in these over-staffed department stores and gives them a THb 100 note with his phone number written on it.

Pure class.

[cclub75]

I would suggest another reason : because labor is so cheap, it would be unthinkable for a Departement store owner not to have a legion of staff.

Staff comes along with goods displayed on the shelf, or decorative elements.

If you push forward : having a few staff, eventhough extremely efficient, would be a sign that your shop is... cheap indeed.

I mean : what would be Siam Parangon with less staff ? Une faute de gout, at least for asian taste.

[steveromagnino]

This is somewhat my line of business.

Fact - the additional staff cost 5,000b but can generate incremental sales of more than 5,000b in profit a month using ABC...therefore....a good investment.

In many cases, the small shop in shop area within a department store has staff from the brand itself, while Central ALSO has staff operating the tills (since Central gets paid as a proportion of turnover), so if the shop in shop area is very small, they have to maybe have 2-3 staff to allow for breaks and also to take into account that if one person is helping a customer, then there needs to be someone else free.

5,000b might be a starting wage; many shop assistants earn FAAAAAAAAAAR more than this with commission, bonuses, overtime and so on.

Key point that some people seem to be unable to understand..there are plenty of jobs in THailand. No one is made to work in a department store. I chose to work in a fish market when I was a kid and earned like $3 an hour I think it was, then had to pay $3 in bus fares to get to and from work; so I always lost one hour straight off (and some shifts were only 2 hours). But I did it, and I never begrudged the owner. Later on, the owner sold his BMW and eventually lost everything as the economy turned there. He put up the capital, and earned a return commensurate with risk.

For some upcountry uneducated people, the choice is working in the rice fields, working in a department store, being security or being a prostitute. Thankfully, many still have enough self respect not to do the last, and of the rest, department store is not exactly lacking in prestige or opportunities to advance.

If you don't like it, invest in some shares in CPN :-)

[JimsKnight]

The main reason I've heard is its a government policy that filters all the way down to the grassroots level and that policy is to give every graduate from college / Uni a job when they leave. Department stores seem to get the 'russian front' levels of manning. The pay is basic but the government can toddle doo and proclaim its got very very low unemployment cause everyone thai who has come through the further education system has a job thrown at them.

[Heng]

In many cases, the small shop in shop area within a department store has staff from the brand itself, while Central ALSO has staff operating the tills (since Central gets paid as a proportion of turnover), so if the shop in shop area is very small, they have to maybe have 2-3 staff to allow for breaks and also to take into account that if one person is helping a customer, then there needs to be someone else free.

A good point that is often overlooked in these types (this overstaffed department store thing comes up pretty often actually) of "I wonder why..." threads.

[steveromagnino]

In many cases, the small shop in shop area within a department store has staff from the brand itself, while Central ALSO has staff operating the tills (since Central gets paid as a proportion of turnover), so if the shop in shop area is very small, they have to maybe have 2-3 staff to allow for breaks and also to take into account that if one person is helping a customer, then there needs to be someone else free.

A good point that is often overlooked in these types (this overstaffed department store thing comes up pretty often actually) of "I wonder why..." threads.

I have many good points K. Heng; I carry a pitchfork and also have extra toothpicks; plenty of points there. :-)

Next up will be the 'why do they use coupons in food courts' thread in 5...4....3...2..1..

[orchis]

Is that also why the salespeople cling to you when browsing? To avoid my possible shoplifting?

Today went to exchange a shirt, actually found a cheaper one and I did not want the price difference re imbursed or otherwise made out in a voucher, just exchange for a cheaper item, but the lady (and I chose this term carefully) said that I could only exchange for an item at exactly the same price not 1 thb more or not 1 thb less, but the only item at that price was the one I had already, boggles the mind. This at Isetan.

Edited January 17, 2007 by orchis

[samtam]

Someone else has suggested to me that the reason for the oversupply of staff is that there are only a very few major players in the department store category - say Central and the Mall Group, so that there is no real competition. The families that own these two outlets are so wealthy they are not particularly bothered about the costs of extra staff, whether useful or not. As and when Thailand becomes more competitive, ("when" perhaps being further away given the current xenophobia towards foreign investors), then the staffing situation might change.

[steveromagnino]

Someone else has suggested to me that the reason for the oversupply of staff is that there are only a very few major players in the department store category - say Central and the Mall Group, so that there is no real competition. The families that own these two outlets are so wealthy they are not particularly bothered about the costs of extra staff, whether useful or not. As and when Thailand becomes more competitive, ("when" perhaps being further away given the current xenophobia towards foreign investors), then the staffing situation might change.

Has that somebody met anyone from Central or the Mall????? The owners are, and I say this in the nicest possible way, some of the most money hungry and most tightwad people I have ever met. Ask your person suggesting this how come Isetan, Sogo, Tokyu, Imperial (I think they came here) and others have not been able to 'set Central and the Mall straight.' What about the hyper markets? Almost completely foreign owned, and have not disimmilar staffing policies in certain areas (such as electronics).

The current 'xenophobia' you speak of is laughable in retail; the foreign department stores are welcome to come and do business here, right here right now. Why don't we see Lane Crawford, Harvey Nichols etc?

Because they believe the market is not big enough to be able to make a profit against the local players; in particular Central Pattana are considered to be fairly decent dept store operators by people abroad; especially in some of their category killer and F&B offerings; not so easy to compete against as they also have picked up a load of the best locations.

Staffing will change when:

- salaries increase enough that the marginal cost of having additional staff isn't covered by marginal profit gained from said staff

- consumers start to express a desire for less staff

This is much like the 'Thailand needs a Tiffany's then Thai people would know what real jewellry and service is like and would flock there' viewpoint that pretty much every American I deal with seems to come out with.

Newsflash: they came, they opened, they went bust; totally uncompetitive and unable to match local operators. NEXT!

[samtam]

Someone else has suggested to me that the reason for the oversupply of staff is that there are only a very few major players in the department store category - say Central and the Mall Group, so that there is no real competition. The families that own these two outlets are so wealthy they are not particularly bothered about the costs of extra staff, whether useful or not. As and when Thailand becomes more competitive, ("when" perhaps being further away given the current xenophobia towards foreign investors), then the staffing situation might change.

Has that somebody met anyone from Central or the Mall????? The owners are, and I say this in the nicest possible way, some of the most money hungry and most tightwad people I have ever met. Ask your person suggesting this how come Isetan, Sogo, Tokyu, Imperial (I think they came here) and others have not been able to 'set Central and the Mall straight.' What about the hyper markets? Almost completely foreign owned, and have not disimmilar staffing policies in certain areas (such as electronics).

Yes, I have met them; they built my condo, and many of the family (Charatiwat) live in it. This is exactly my point.....these people know what affects the bottom line, which must include overstaffing, and yet they tolerate it, even if it is a marginal cost.

The current 'xenophobia' you speak of is laughable in retail; the foreign department stores are welcome to come and do business here, right here right now. Why don't we see Lane Crawford, Harvey Nichols etc?

Because they believe the market is not big enough to be able to make a profit against the local players; in particular Central Pattana are considered to be fairly decent dept store operators by people abroad; especially in some of their category killer and F&B offerings; not so easy to compete against as they also have picked up a load of the best locations.

Yes, it's not a realistic playing field. The stores you mention are owned by HK Chinese and they know how many beans make five, and they do not subscribe to the toleration of unnecessary and unproductive costs.

Staffing will change when:

- salaries increase enough that the marginal cost of having additional staff isn't covered by marginal profit gained from said staff

- consumers start to express a desire for less staff

There are not enough customers to express that interest; the ratio of staff to customers is about 5:1

This is much like the 'Thailand needs a Tiffany's then Thai people would know what real jewellry and service is like and would flock there' viewpoint that pretty much every American I deal with seems to come out with.

Newsflash: they came, they opened, they went bust; totally uncompetitive and unable to match local operators. NEXT!

[samran]

Yes, I have met them; they built my condo, and many of the family (Charatiwat) live in it. This is exactly my point.....these people know what affects the bottom line, which must include overstaffing, and yet they tolerate it, even if it is a marginal cost.

I think you’ve confused what Steve means here by ‘marginal cost’. It isn’t ‘marginal’ in the sense of a ‘small’ increase in costs, one that is neither here nor there to the extent that the central owners don’t care about it.

From Steve’s post, ‘Marginal Cost’ is very much an economic concept, which means ‘the additional cost from an extra unit of Labour or Capital to an enterprise’. This could be one dollar, ten dollars, or a million dollars. Or in this case, the marginal cost would be 5000 baht + cost of seat.

So long as the Marginal Revenue derived from that extra staff is 5000 baht + 1, then it is always in the interests of central to hire more staff.

Good stuff this economics…..

[samtam]

OK understood, and it makes sense and cents. So the answer to my original query is that all these extra staff, however many and however unproductive they may look to an observer, is that they actually cover their costs. So the concept of having sales or super sales people has not yet developed here.

[trajan]

The current 'xenophobia' you speak of is laughable in retail; the foreign department stores are welcome to come and do business here, right here right now. Why don't we see Lane Crawford, Harvey Nichols etc?

this statement is not correct...(if you are speaking of foreign retailers coming to Thailand WITHOUT a Thai corporate joint venture partner)...Please see List 3 of the Alien Business Law (ABL) which restricts foreign companies from operating a "retailing" business (because "Thais are not yet ready for competition" in retailing businesses as listed in List 3)....

.... the new proposed amendments to the ABL (in violation of Thailand's committments under the WTO) further propose to tighten this business activity area up by not allowing any variance of shareholder voting rights in companies carrying out retailing businesses ... the new proposed amendments also eliminate the larger retailer exception to the ABL....

in addition, the newly threatened separate Retailing Act further contemplates more restrictions on foreign sourced retailers....

why do you state that foreign department stores are welcomed in Thailand??

Edited January 19, 2007 by trajan

[Pilchard]

As someone mentioned before, the staff are supplied by the Brand concesion and not the store.

This is why they will not help you buy from another area of the store.

As most Department stores are open more than 8 hours you also need multiple shifts of staff throughout the day.

People on such low salaries are also pretty savvy about their rights to braeks and sick leave ect..and use it to the full.

Staff turn over is also so high its easier to hire 4 people at 5,000 bpm than 2 at 10,000bpm .

Retail sales are also very time consuming, waiting while a fussy customer tries on endless sizes and colours, you are loosing sales elsware if you don't have enough staff.

[wolfmanjack]

It's also worth bearing in mind that that 5000 Baht is for 50+ hours per week which makes it even more profitable.

I think some of you need to check out the labor laws here in thailand. the 5,000 per month is for 6 days a week 8 hours per day. Anything over 8 hours is overtime payable at 1.5 x's normal pay. Plus all of the paid holidays required, paid sick leave, workers comp, social insurance and the fact that they don't so much now and did not do much to earn their degree while in school means the 5,000 per month is good pay for them.

I have a business here and i over staff because of the absenteeism. You have to hire at 150% of what you actually need to make sure you havee nough workers.

[steveromagnino]

this statement is not correct...(if you are speaking of foreign retailers coming to Thailand WITHOUT a Thai corporate joint venture partner)...Please see List 3 of the Alien Business Law (ABL) which restricts foreign companies from operating a "retailing" business (because "Thais are not yet ready for competition" in retailing businesses as listed in List 3)....

.... the new proposed amendments to the ABL (in violation of Thailand's committments under the WTO) further propose to tighten this business activity area up by not allowing any variance of shareholder voting rights in companies carrying out retailing businesses ... the new proposed amendments also eliminate the larger retailer exception to the ABL....

We are talking about department stores right? So.....

1. They could find a local partner, which leaves them in a similar position to virtually every other business in every other industry, and strangely I don't see that a local Thai start up would have a significant advantage over a foreign new entrant solely on the basis of shareholding structure

2. As I am sure you are aware, the issues of list 3 is still not clear, they could apply for the right to exceed 49% shareholding as operators such as Tesco are in the process of doing

3. As a department store, providing they are not operating retail space, then they would be in the EXACT position of Central Dept Store, Isetan and many other dept stores world wide pretty much, leasing premises; and while not clear it would seem that this is not part of list 3 either; AFAIK they would be allowed 100% foreign ownership following law changes in 1998, but that I am not totally sure of

4. In any case, American department stores could use Treaty of Amity rights to obtain 100% ownership as per point 3; except that being pretty much inept in Asia, I am not sure they would get far; incidentally, strange how Treaty of Amity is in total breach of WTO and yet the American Embassy still is not pushing for it to be cancelled? Strange that one; I don't think either of us are Americans, but still......

My whole point is that given the rate at which international brands have been welcomed and brought into Thailand, and continue to do so, a department store is nothing else other than a group of brands with much the same logistics, branding and management issues. I've been involved in looking at a business case for bringing in foreign dept stores, and it isn't that easy to use the foreign dept store model here against guys like Central who are thoroughly vertically integrated, have fairly decent merchandising, have the best locations, have a solid reputation with their target markets and actually operate in a non entirely inefficient manner.

This fat you speak of the unnecessary costs and inefficiency that you think the HK Chinese see when they look on; fascinating. I cannot claim to know what they see; last time I dealt with one of the department store brands in HK (and NOT a HK Chinese one, a Brit one) was a couple of years back. Because normally seeing so much inefficiency would have someone salivating to come in and 'do a Virgin' - an approach of finding fat inefficient industries then kicking the pants out of them in a cost position. Problem is.....department stores worldwide aren't the low cost operator you think they are, at least not for staff. If you want that, go to Big C and hyper markets, which are here already.

So... why are they welcomed? Well, if they want to bring it on, the door is open.

Sadly, I think most are too smart to bother; strong incumbent + saturated market + decreasing consumer spending + price disadvantage regionally due to taxes (for all retail on luxury goods) + complete lack of local knowledge + lack of quality locations + limited scaleability compared to China/India = go to China and India first. note, I doubt they consider the ownership structure issue; they are opening in middle east and India for goodness sake, they know what hoops are.

Money is a finite resource, why bother coming and get kicked like Tiffany did (I name Tiffany because invariably this is the example American retail consultants flown in for one day earning what I earn in a year probably always name as the one that is going to come and kick Thai jeweller derriers....yeeeeaah bring it on; nice play Einstein, nice theory Shakespeare.)

[samtam]

Thanks steveromagnino. The point about overemployment in other areas that are non profit making, such as security guards and cleaners still baffles me though, as these cannot simply be written off. Perhaps just inefficiency in productivity?