Talent is logging in. Are you?

The space of online marketplace in India has witnessed an explosion of activities in the recent past with established players like Amazon fighting with home-grown players like Flipkart and Snapdeal for the bigger slice of the market. A plethora of other players like FabFurnish, Urban Ladder, Lenskart etc are also giving the bigger players a run for their money and battling it out with VC investors for more funding. The latest development in the space is that China’s Alibaba is looking to enter India’s booming online retail industry and is in talks with Snapdeal, newspaper reports suggest. The news is significant considering the size of the company – it is bigger than Amazon and eBay combined and was valued at $165 billion at the conclusion of its initial public offer.

Before we get into the nitty-gritty side of the story, let us look at what has spurred this online revolution. Internet has transformed the way business is done. Be it buying clothes, furniture or even groceries, reading the newspaper or conducting banking transactions on the mobile, everything is available at the click/swipe of a button. Many factors have facilitated the development of the digital commerce space or online businesses. Firstly, e-commerce companies are betting on more young people with higher disposable incomes to start buying online over the next five years. According to an IAMAI-KPMG report, young people in India spend 16 per cent of their disposable income online and an estimated 828 million Indians will be less than the age of 35 in 2015.

Secondly, the increasing penetration of internet and mobile has ensured that people have access to the online businesses on the go, everywhere they go. As of June 2014, there were 243 million claimed Internet users in India – more than the US with 207 million and behind China with 300 million – out of which 192 million are active Internet users who access Internet at least once a month, a November 2013 report released by the Internet and Mobile Association of India (IAMAI) and IMRB International said. While the internet penetration in urban cities is at 36 per cent, it is a measly 6 per cent in rural areas. Broadband internet connectivity, which was considered a luxury until a few years ago, was a mere 3.2 per cent in 2013 as shown by data from International Telecommunications Union (ITU). It is much lower than the global average of 26.7 per cent and placed India at the 113th spot among 138 countries. Thirdly, cheaper phones and a ballooning telecom industry has pushed India to fuel the digital revolution. Consequently, e-commerce in India is currently growing at a compounded annual rate of 34 per cent since 2009, according to IAMAI.

India’s internet contribution to GDP could increase from 1.6 per cent in 2012 to between 2.8 per cent and 3.3 per cent by 2015, according to McKinsey. Anshoo Sharma, Principal at the Lightspeed Venture Partners says, “We are still looking at only 20 million buyers of an online population of approximately 200 million which could go up to 500 million in two to three years from now, largely driven by the growth of mobile internet and smartphone devices. This growth will be one of the key reason for expansion and bulk hiring.”

The boom of the domestic online industry is being amplified by the huge movement of talent from across the industries to the online businesses. From engineers to logistics, from COOs to CFOs, major e-commerce players are attracting hordes of talent, at the expense of other organizations. Increased funding and presence of marquee names like Ratan Tata (Snapdeal & Bluestone), Azim Premji (Myntra & Snapdeal) and NR Narayana Murthy (Amazon India) have raised the credibility of such start-ups. Strong funding in the recent past is an indication of the increasing confidence of investors and venture capitalists in terms of the industry’s growth potential. Zomato raised a $37 million from Sequoia capital in addition to its initial funding of $16.5 million from Info Edge. Snapdeal recently attracted $100 million in a new round of funding from Temasek, BlackRock Inc, Myriad, Premji Invest and Tybourne taking it to a $1 billion valuation. Flipkart raised a $1 billion funding in a single funding round, which is the largest in the e-commerce sector in India up till now. Amazon also announced an investment of more than $2 billion to expand its India e-retail business further.

Sharma says, “These organizations are growing rapidly and would need more people going further.” Seconding that, Atul Vohra, Managing Partner and Member of Global Executive Committee, Transearch India, says “Since funding is already flowing in well for the e-commerce industry, the next big differentiator will be the human capital.”

With human capital going to be the key differentiator, companies are using the funds to attract the best talent the market can offer. And they are leaving no stone unturned for this. “Hiring great talent is embedded in our DNA such that we cannot compromise on the quality of talent at any cost,” says Raj Raghavan, Director HR India, Amazon.

In the coming years, online businesses will prove to be a game changer for the talent market. Avdesh Mittal, Senior Client Partner and Regional Market Leader, Digital Media, Korn Ferry International says, “Any business in today’s time is a people business and with the increasing funding, the e-commerce companies are now able to hire and retain the best of talent.” In this cover story, we attempt to find out what is attracting talent to the e-commerce industry and how other organizations are going to lose out in the bargain if they don’t have strong people practices.

Like most industries, e-commerce companies are also looking at a fair mix of fresh and experienced talent. But, unlike most industries, they do not have access to market-ready talent. With the online industry still at a nascent stage, the e-commerce companies are offering exorbitant salaries to bring in the crème de la crème from premium institutes and even hiring talent from lateral industries. As Sharma of Lightspeed Venture Partners puts it, “Even though these companies are looking for more people to scale-up, the reality is that the kind of talent they are looking for is not readily available in the talent market.” This hiring trend is impacting the overall job market of the country. Leading consultancy Randstad recently said with the rapidly expanding e-commerce businesses in India, hiring activities are expected to grow by over 30 per cent in the sector and may help create up to 50,000 jobs in the next two to three years. The current financial year is seen as the tipping point of this hiring trend as the job creation rate of the industry is also being compared to that of the telecom industry in the early 2000s.

With such an enormous potential of creating jobs and acquiring talent, other companies better watch out and should start tightening their talent practices and revising their compensation structures to attract and retain talent. The pay packages that leading players like Flipkart and Amazon are offering engineering graduates or other freshmen are already 50 per cent higher than the regular market pay. Anuj Roy, Partner, Transearch India says, “With increasing capital, talent acquisition and capability building are the major focuses of most online players. In terms of the compensation offered to get a hold on premium talent, these players are now at par with Google, SAP and similar companies that have been one of the best paymasters so far.”

The online businesses may superficially seem to be solely technology driven, however the reality is that they are people driven. It is the talent in these companies that drives innovation and its execution to take the business to greater heights. In addition, it sets perceptions about the company’s capacity to grow further. As Mittal says, “This pool of top talent that the e-commerce industry is able to attract, further attracts more money be it through the consequent growth in business or by gaining the confidence of more investors. This money gets further redeployed in the country leading to overall growth of the economy.”

Online companies like Zomato are focusing their efforts on creating a strong employer brand. Upasana Nath, Chief Recruitment Officer, Zomato says, “As you expand, you need more people to take your brand further and our people are our best brand ambassadors, be it from the content, the marketing or from the product teams.” The online businesses are pumping their well-earned funds back into people, thereby laying a foundation for making the industry self-sustaining. This combined with their diverse talent engaged in a flexible and fun work environment is what will lead them to greater success in the coming times. As Rajiv Srivatsa, Founder & COO at Urban Ladder says, “The ability of the e-commerce industry to absorb people from all domains and its flexible work culture is the USP of the industry for talent.”

Lucrative offers and engaging work culture is attracting talent by the hordes. This is having a direct impact on the talent flow to other industries. As Vohra of Transearch explains, “The spurt in e-commerce hiring due to the disproportionate demand for talent in this domain will create a domino effect, hugely disrupting the talent availability in most other industries, especially in the consumer sector.” Here are a few factors responsible for pulling talent towards online companies and ones where other organizations can take measures to prevent the flow:

Hiring talent, not just immediate role-fillers: From unskilled to skilled labour in the delivery chain, to IT or software development professionals for coding, the online space has an opening for all. The expanding businesses are becoming increasingly organized, consequently creating newer job opportunities. Unlike most organizations, the online businesses have displayed a very far-sighted approach in terms of hiring great talent, not just against specified roles but as generalists as they will be the foundation for scaling further.

Looking at talent beyond biases: The most peculiar aspect of the online industry is that it is accepting talent irrespective of their backgrounds, thereby breaking the conventional barrier that used to bind people to a specific job or industry for their entire career. A professional from hospitality, consulting, telecom, logistics, FMCG or any industry could explore the e-commerce industry provided they have the perseverance to learn and evolve with the fast-paced industry. There are numerous senior executives in the prominent online companies who have come from a different background, but are now passionately running the show.

Hiring for attitude, not just skills or experience: As Mittal of Korn/Ferry says, “E-commerce attracts and employs people who have a passion for action along with an entrepreneurial attitude. This is also one of the major differences in the nature of the ‘going-digital’ or the traditional organizations and the ‘born-digital’ or the new-age entrepreneurial organizations.” “More than experience or skills, we look for hustlers or go-getters who are ready to hit the ground running, work hard and be a part of our work-culture that is fun, rewarding and growth-oriented,” says Zomato’s Nath.

Tapping the young and upcoming: Online companies are taking the lead in campus hiring placements by hiring in the first two days, forcing other industries to settle for the second best talent. It is also because they are proactive in terms of engaging with the potential talent pool through abundant opportunities for internships and pre-placement campus learning drives. Upasana Nath of Zomato says the number of graduates who want to join start-ups rather than established corporates has also gone up recently.

Adding owners, not just employees through ESOPs: The e-commerce companies are also going beyond the usual compensation methods, offering stocks to their employees which is a huge attraction for talent as it provides them opportunities for wealth creation. It also encourages ownership of work, thereby improving productivity. It is a great retention tool as well.

Hiring and then developing internally: The online businesses are creating opportunities for people from all domains. For instance in logistics, marketing, operations, product development, project management, sales, IT, analytics and even creative profiles such as content creation, design, photography, videography etc. While there is abundant talent for these assorted roles in general but not in the online industry and hence they look for talent from lateral industries. For certain roles, they hire freshmen and groom them internally for the skills required.

Flexible culture: Owing to the flexible work culture, opportunities to innovate, experiment and explore newer possibilities, talent from the corporates is now readily moving towards online ventures. Roy says, “Talent will flow in from different lateral companies as people from more matured companies are now keen to explore working in companies that are in the growth mode. As a result, those industries will see a struggle in retaining their talent.”

Although such unique practices are hugely benefitting these companies, they can disrupt overall talent availability, creating difficulties for other industries in the coming times. As Anuj Roy of Transearch puts it, “With such unique practices, these budding companies are changing the rules of the game. Going further, retaining talent will become very difficult for other companies. Even the companies that have had exceptional retention records will see new challenges in the near future and only those companies that earnestly invest in their people management practices and are seen as good companies to work for, will be able to retain talent and will see huge benefits of the same.”

The major players in the online space are now also looking to expand globally. Zomato and Flipkart are companies that have already taken lead in drawing talent from outside India. Experts suggest that this trend could exist for another four to five years till the industry would have created a new pool of talent trained with the desired skills. Sharma says, “This industry will create a new talent pool that earlier didn’t exist. Unlike other industries, the learning curve in these organizations is very different because of better exposure and experience to people.” Until then, it will continue hiring from various other industries and domains. Zomato’s Nath says, “In such a scenario, even if there is a talent war, companies like us would turn out to be winners as it would be an opportunity for us to capture even the passive talent from other domains.”

Better safe than sorry! And this is what the forthcoming talent scenario suggests to organizations that might have overlooked their people processes in their ongoing business routines. Talent movements are not new. However, the scale at which the online industry is expected to attract talent from everywhere could be a matter of concern for many. This industry is becoming the biggest talent magnet and has already begun showing its strength as an employer. While it may not be possible for all to match the compensation offered by the online players, organizations can focus more on their people processes to reward, recognize and retain the best of their people.

A few organizations have already taken measures ensuring stability and keeping employees engaged. One of those measures is looking at ESOPs as a long-term currency over and above the compensation offered. Hero MotoCorp Ltd recently announced 4.99 million ESOPs to its employees and directors in an effort to hire and retain top executives. Organizations are also actively engaging with college students through innovative campaigns like Godrej’s LOUD (Live Out Ur Dream) a competition encouraging out-of-the-box ideas and ING Vysya Bank’s ‘Hunt for the Lions’ a case study competition.

The smart cycle of increased access to top talent as a result of growing capital and bright talent in turn leading to more capital is going to give online players an edge over all other businesses. At the center of this cycle is the people-oriented outlook of this industry. While marketing, logistics and other aspects of their business also demand efforts and investments, the industry invests most in its people as it is able to foresee the impact of doing so. It can foresee the RoI of investing in great talent and the importance of retaining them. It is this virtue of the online players that is escalating their growth and will also go a long way in sustaining the same.

Needless to say, organizations that bask in the glory of their financial success and follow a more profit-oriented or product-oriented approach will not only lose out on their best talent gradually but in the long run will also put their business at risk.