The Luxury Sector Has a Talent Problem

According to a new report titled Minding the Talent Gap: Fashion and Luxury’s Greatest Challenge for the Next Decade, the luxury industry is suffering from a talent shortage. The challenge, it says, is finding “professionals with true creativity who can blend their right-brain talents with the left- brain demands of a range of roles in the increasingly complex fashion business.” Moreover, a study by The Boston Consulting Group and Business of Fashion finds that surveyed luxury executives are anxious about finding talented workers, and “50 percent of respondents believe that they lack access to the best creative talent.” Consequently, tackling this talent shortage has become a big priority for luxury retailers. The race for securing top talent has been aggravated by the dynamic technology landscape, the ever-evolving demands of the retail sector, and new, multi-channel approaches to marketing. Implementing new technologies means recruiting workers with many new job skills but also implies a shift in corporate mentality. Today’s marketers have to understand both consumer behavior (marketing psychology) and the market itself (sales and marketing strategy), have a strong business acumen (preferably an MBA), have a global mindset, and be able to fully leverage the power of digital technology (data analyst skills). Therefore, recruiting and cultivating the best talent has become a much trickier and extensive process for companies. Research by the Boston Consulting Group “confirms that companies with superior hiring, development, management, and retention practices see clear economic benefits,” and they also found that the luxury companies that had an edge in recruiting enjoyed faster revenue growth and double profit margins. Universities have become today’s most convenient scapegoats for luxury executives, and, according to many business leaders, these institutions are the ones responsible for the skill shortage across many industries. But the issue is more complicated because employers share in the responsibility of training talent alongside the university system. Also, today’s fast-paced society constantly demands new technical and interpersonal skills, so it has become increasingly difficult to keep pace with an always-evolving business environment. To address this skills shortage, employers should work with universities (instead of against them) in helping to build an effective talent pool, and through internships, guided activities, vocational training, and customized workshops, businesses can source, screen, and better mentor the talent that they’re so desperate to acquire. China is ahead of the curve when it comes to growing talent, but the supply chain is slowing down even in this relatively new market. Nevertheless, China is home to rising market stars like Alibaba and Tencent — companies that have been rewriting the rules of recruitment to build a consistent and successful leadership pipeline for decades to come. According to the South China Morning Post, around 100 million people work in manufacturing in China, and this new age of automation requires new skills. But, there’s also an epidemic of fear surrounding robotics (as well as outsourced jobs), and various sources have reported that technological changes will eventually end work for millions of employees. A 2013 Oxford University study found that about 47 percent of total U.S. jobs are in danger while McKinsey estimates that “59 percent of all manufacturing activities could be automated.” Moreover, McKinsey mentions that some sectors are harder to automate because they require people skills, including education, healthcare, coding software, or preparing marketing and communication materials. Even the former President of the World Bank Jim Yong Kim admitted in a 2016 speech that 77 percent of jobs are at risk of becoming automated in China. Chinese workers are also facing the challenges of the Fourth Industrial Revolution. The South China Morning Post mentions that in 2018, the industrial city of Dongguan earmarked $56.8 billion for automation processes. Additionally, an ambitious government plan called Made in China 2025 will transform the city of Foshan into China’s robotics hub, with the Post saying that “the number of industrial automatons operating in the country would expand tenfold to 1.8 million units by 2025 when up to 70 percent of the robots used in China would be made in the country.” This means new skills will be required as China moves further away from low-grade production and low-tech manufacturing to become a dominant, high-tech power. Demographics are also a major impediment to the development of a powerful workforce. Jing Daily reported that “China has an aging problem, and this is a hazard to the country’s economic breakthrough.” Also, according to a study by the Chinese Academy of Social Sciences, if China continues on the same path, its population will peak at 1.44 billion in 2029 before declining drastically. Time.com also indicates that “the country will enter an era of negative population growth, warning that by 2065 numbers will return to the levels of the mid-1990s.” The value of a strong labor supply shouldn’t be underestimated, because, in the end, it’s human capital that transformed China into a global power, and without an adequate talent supply, luxury businesses will suffer even more. Luckily, some companies are reinventing the rules of talent acquisition through innovative new practices. Alibaba emphasizes both personal and professional development, proclaiming that transparency, unity, meritocracy, idealism, and diversity are its pillars for success. A new level of transparency is reinforced through AliWay, the company’s intranet platform where users can debate ideas and communicate their complaints freely and without repercussions. Additionally, senior management must always keep an “open” email where they respond to private messages from their employees. Gender diversity is a quality that isn’t easily associated with the technology industry, but Alibaba is the exception. According to Alibaba, when the company was created in 1999, a third of the 18 founders were women, and today, a third of Alibaba’s senior management positions are also women. “Within our organization, women play prominent leadership roles in, among other things, engineering, product, customer service, risk management, human resources, and financial management,” says the Alibaba report. Alibaba also invests in a culture which “values meritocracy over hierarchy,” and the company pushes employees to adopt higher ideals of change, optimism, and idealism. According to Judy Tong, Chief People Officer, Alibaba Partner, the influence that the group has in China and abroad is “a privilege and a responsibility.” Consequently, Alibaba grades employees in their performance evaluation on how well they fulfill the “values of customer first, teamwork, embracing change, integrity, passion, and commitment,” says Tong. Other internet companies like Tencent and Baidu also meet the demands of a challenging talent market by using digital technology in their recruiting practices. Both companies use artificial intelligence and big data to predict employee resignation. Furthermore, these companies have management training programs and in-house academies where they further develop the skills of future talents and managers. Alibaba, Tencent, and Baidu are HR pioneers of the new era, but not all companies will overcome recruiting challenges and implement innovative talent retention practices. Some luxury players still believe that a good name and reputation are an adequate way to attract and secure the best talent. We estimate that these companies will find it difficult to secure skilled labor even if they embrace foreign-born talent, and as a minimal effort, they should invest in pre-hire training, apprenticeships, employee development programs, and professional development initiatives. Otherwise, they will eventually lose market share and revenues.

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The Luxury Sector Has a Talent Problem