Last week, Falabella made two major announcements regarding changes in the company. The first announcement concerned the closure of its Estación Central branch, as part of a plan to optimize the company’s space usage. The second announcement, made to employees internally, outlined an adjustment plan that would involve all business units in all countries, with a focus on layoffs in intermediate positions. The company aims to reduce its salary expense by 5% to guarantee its leadership position in a challenging economic climate. The firm also revealed that it had separated 17% of Falabella Inmobiliario, resulting in 40 people leaving their jobs. The company aims to maintain its e-commerce leadership by carrying out the biggest transformation in its history. While the company did not specify the number of employees affected, the expense for salaries and expenses for non-banking business personnel totaled some US$1,636 million, with a 5% reduction being the goal. Last year, Falabella experienced an 86% drop in profits despite generating sales of US$14.350 million across all its markets. The company had previously announced measures to optimize its operations, such as closing between 5% and 10% of its physical stores over the next five years in three markets where it operates: Chile, Colombia, and Peru. Falabella had a staff of 98,430 workers in 2021, which dropped to 91,278 in 2022, a total of 7,152 fewer people.
It was not just an isolated piece of news. Last week, Falabella announced that he was leaving Estación Central. He had debuted in 2008 at Mallplaza Alameda and now he has chosen to leave that location. “This decision is part of the space optimization plan already announced and in the continuous evaluation that is made regarding the strategic value of each of its stores,” the company said on Thursday. The next day, however, another announcement – communicated internally – added to the changes in the company of the Solari-Del Río families. That day, the firm separated 17% of Falabella Inmobiliario, a business that involves the Open shopping centers and the infrastructure services area; in total there were 40 people.
The adjustments, however, will go further and will involve, the firm said, “all business units in all countries.” The company seeks to reduce its salary expense by 5%, a process that is currently under development, and which will focus on layoffs in intermediate positions, where there is basically duplication of functions. Several retail companies, but smaller ones, such as La Polar or Hites, have applied staff cuts this year. Now Falabella joins.
“Given the context of economic slowdown that has weakened consumption, Falabella decided to speed up the transformation process of its internal operation, in order to improve the margins of its business to guarantee its leadership”, pointed the company to Pulse.
Falabella added: “This process seeks to achieve a more agile and efficient structure, simplifying it and allowing greater flexibility and coordination between the teams, as well as gaining synergies. In turn, it implies that some areas can function with smaller and more productive teams. Therefore, it involves all business units in all countries and will be focused on office leadership so as not to affect service in our stores.”
The retailer reported that it had a robust support program and a comprehensive assistance plan for those who leave the company.
The company did not specify the number of people who will leave, but it did detail the goal of a 5% reduction in its salary expenses.
In its 2022 financial statements, the expense for salaries and expenses for non-banking business personnel totaled some US$1,636 million. In wages and salaries alone, the figure is close to US$1.2 billion.
Last year, the once retail giant had a bad year: its profits fell 86%, to US$105 million, despite registering sales of US$14.350 million in all the markets where it operates.
The conglomerate had announced measures a few months ago to try to make its operation more efficient. Among them was closing between 5% and 10% of its physical stores over the next five years in three markets where it operates: Chile, Colombia and Peru.
In 2021, Falabella had a staff of 98,430 workers, a year later that number dropped to 91,278. In total, 7,152 fewer people. Only in Chile the drop was 3,472 employees: from 50,972 to 47,500. The peak year, when the conglomerate reached 104 thousand workers, of which 54 thousand were in Chile. From then on, the number has shown a constant fall: in 2020, the year of the pandemic, it reduced its workforce in Chile by 5,000, but the number rose once more in 2021, with the recovery of consumption.
During 2022, in practically all its operations -Argentina, Brazil, Peru, Uruguay and Mexico- the indicator fell. There was only one increase in Colombia -from 7,097 to 7,194-, and in those countries where they have commercial offices such as China -from 147 to 156- and India, from 325 to 458.
As of December, the company had 206 stores in Chile including department stores, Homecenter, Tottus and Ikea; in Peru, 177; in Colombia, 66. In the latter country they are only with Falabella and Tottus; in Argentina, seven Sodimac; in Brazil, 55 home improvement stores; in Uruguay, four of the latter, and in Mexico, nine. Falabella also has 10 Open shopping centers in Chile, which translates into a leasable area of 218,198 square meters, and eleven in Peru that total 322,326 square meters.
The Open -according to Falabella- consider all those power centers and shopping centers other than those operated by Mallplaza. It does not consider Autoplaza. “At Falabella we are continually reviewing our operation and structures, to adapt them to the different contexts and ensure the execution of our long-term strategy,” the firm stressed.
“After an exceptional year 2021, this 2022 has been a very complex year of which the entire company and whoever is speaking to you are very aware,” wrote Carlo Solari in the letter to shareholders that accompanies Falabella’s 2022 report, which was released this Monday. The president of the company began his annual account, mentioning that it was a year with difficulties, but at the same time expressing his confidence that “although the path traced is complex, it is essential to ensure Falabella’s success over time.”
Solari highlighted the performance in the area of electronic commerce. “Online sales continue to grow without a foreseeable ceiling and already represent more than 80% of sales,” said Solari, adding that in developed countries, the marketplace It has established itself as the “undisputed” leader of electronic commerce.
“Making this transformation now, at a time when we are the leaders, we believe it is the right thing to do to maintain our leadership in regional trade. We are carrying out the biggest transformation in the history of the company.” The executive said in this regard.
Solari listed why Falabella faced a challenging environment. “The reduction in state aid and savings withdrawals, added to an inflationary context, strongly affected our clients. This situation led them to reduce consumption in categories such as electronics, home construction and remodeling, and clothing, which are key to our company, as opposed to other more stable categories such as food.”
In conclusion, Falabella’s recent announcement of staff cuts and restructuring of its business units is a clear indication of the company’s efforts to adapt to the changing market conditions and ensure its long-term success. The economic slowdown and weakened consumption have prompted the retail giant to speed up its transformation process and improve its margins. Despite the challenges, the company remains confident in its electronic commerce sector, which continues to grow without a foreseeable ceiling. Falabella’s transformation is an ongoing process, and it remains to be seen how successful it will be in achieving its goals. Nonetheless, it is clear that the company is taking bold steps to maintain its leadership in regional trade and carry out the biggest transformation in its history.
