By Michael Song, Managing Director MS2 Retail Advisory.
There is a trend in retail that is quietly gaining momentum.
Savvy retailers are taking playbooks from Big Tech and Banks and adopting global offshore workforces to improve their talent base and manage costs.
I’d officially like to call it ‘Global Sourcing 2.0.’
In the wake of global competition and the need to manage increasing costs in the face of a recession, retail leaders who balk at the idea of managing teams in countries like India and the Philippines may find themselves sharing the same fate as their predecessors in the 1970s-80s who balked at the idea of moving production offshore to countries like China and Mexico—going out of business.
Fast forward to 2023, it’s common, if not a requirement to be competitive, for retailers and manufacturers to manage the production of goods in offshore factories, such as those in China, Mexico, and other developing nations.
But, white-collar jobs have predominantly remained in North America. This is now changing…
Today, there are thousands of North American companies outsourcing technology, finance, merchandising, operations, and e-commerce functions to India, and it’s growing fast. Last year alone, both Neiman Marcus and Lululemon opened global capability centers in India to help achieve their technology, e-commerce, and merchandising goals.
Here is a quick snapshot of the big ones over the last decade:
So what’s driving this movement? Old stereotypical perceptions of low-quality Indian call centers are now replaced with world-class global technology centers like Bangalore – India’s Silicon Valley. Cities like Bangalore offer retailers skilled tech labor that is plentiful and affordable. This allows retailers like Lululemon to “tap into India’s tech talent to support digital transformation, improve omnichannel capabilities, and develop roadmaps for more advanced technologies like AI and cognitive competencies.”
But it goes beyond technology. Given the low cost of well-educated, skilled labor, back-office roles in merchandising, e-commerce, finance, and operations are quickly moving offshore. In today’s world, where there is resistance to return to the office and increasing labor wages dominate, it’s an easy decision to move roles that can be done remotely offshore, where average labor savings are generally over 50%. Due to the forced Covid-19 remote work policies that retailers adopted, they have already had three years of practice managing teams and projects remotely. Now, whether the employee is working remotely down the street or on another continent, it’s a moot point.
So is this the end of white collar jobs in North America? No, not really…
In the 1970s when production moved offshore, successful manufacturers shifted their focus from managing production lines to strategic activities that created real value by improving offerings through design, product curation, and customer experience. Focusing on design and customer experience while achieving low-cost production proved to be a winning formula.
In our post-Covid economy, retailers will again shift the mix of local versus offshore. With the proliferation of e-commerce and third-party marketplaces, managing technology and the transactional workload that comes with it is a massive burden for a retail head office. However, product margins and customer wallets have remained flat or decreased, putting enormous pressure on profitability as retailers struggle to manage these new work activities.
It now only makes sense to keep critical strategic roles in North America, moving transactional, technology and operations roles to remote global centers.
Large multinational retailers are relying on partnership with large consulting companies like Wipro, Tata Consultancy, Infosys and ANSR to build out their remote capabilities campuses. According to ANSR website they work to “enable companies to build distributed teams in support of workforce transformation, building strategic capacity and onboarding global enterprise talent. Through a flexible, ‘no-capex’, ‘pay-as-you-grow’ subscription based engagement mode”. A compelling offer in today’s depressed economic climate where technology is at a premium.
Small to mid-size retailers are joining the trend as well. Working with small to mid-size retailers & DTCs, consultancies like MS2 Retail Advisory has been getting high interest from executives looking leverage global talent to replace open vacancies. Its not just call center and data entry roles that are being offshored. As head office teams are still working under hybrid or remote environments more senior levels roles and all areas of merchandising, ecommerce, supply chain and finance are on the table.
Even retailers like Tesco are finding new revenue opportunities helping other retailers build out global centers. As one of the first pioneers into India (2004), recently Tesco’s Global Business Services (GBS) unit announced plans to enter the business-to-business (B2B) market by helping other retailers across geographies set up capability centers in India.
So once again, global barriers are falling, and the world is becoming ever smaller. As history has shown us, those who have embraced change and adapted their business models to suit new realities in their environment usually live to fight another day. While the goal is not to adopt change for the sake of change, but to reevaluate one’s business and cost structure to ensure that they are using every possible minute and dollar to provide excellent value to their end customer. Leveraging global teams and offshoring surely won’t guarantee success, but it will give resource-strained retail head offices some breathing room and redirect time, energy, and money to focus on what is important to their customer.
 Phadnis, Shilpa. 2021. Canada’s Lululemon Athletica opens tech Centre in Bengaluru. The Times India. Accessed 5/24/2023. https://timesofindia.indiatimes.com/city/bengaluru/canadas-lululemon-opens-tech-centre-in-bengaluru/articleshow/82298525.cms
 ANSR. 2023. About ANSR. ANSR Website. Accessed 5/24/2023. www.ansr.com
 Sureban, Haripriya. 2023. Tesco’s India unit plans to setup capability centres for other retailers. The Hindu Business Line. Accessed 5/24/2023. https://www.thehindubusinessline.com/companies/tescos-india-unit-plans-to-setup-capability-centres-for-other-retailers/article66800214.ece