Alibaba-backed Daraz fires 11% of its global workforce

Alibaba Group Holding Ltd‘s Daraz Group, a provider of e-commerce and technology infraustructure services, has laid off 11% of its global workforce to revive its slump in global e-commerce.

In a memo sent to employees, Bjarke Mikkelsen, the company CEO, explained that the global economic downturn and the war in Europe dented the company’s profits despite adding new shoppers in the past 5 years.

His statement reads, Today I’m making the tough announcement that we are reducing our team by 11% and saying goodbye to many talented people in the process. This decision has been made by myself and the leadership team to prepare the company for the current market reality and to ensure that Daraz will thrive in the long term to achieve our vision.

For the last 5 years, we have been following our long-term business plan and increased our active shoppers from 3 million in 2018 to more than 15 million today, with an average order growth of almost 100% until last year. We came out of COVID strong thanks to all the hard work and dedication of everyone in the team. I can’t thank you enough for this!

He added that the decision to terminate employee contracts was to prepare the company for the current market reality and to safeguard that Daraz thrives despite all odds against its economic and online commerce pursuits.

Unfortunately, it’s not enough and we need to do more to adjust the company to the lower growth outlook in the next couple of years. In order to weather the storm, we need to collectively do everything we can to improve profitability and save costs. This includes refocusing on the core business, simplifying the organisation and doing more with less in all departments.

He explained that the staff affected would be catered for as the company looks to move forward.

But for now, our top priority is to support everyone impacted by the organisational changes. During these challenging times, you have fought for our customers and sellers alongside your teammates. Your work matters, and you will always be a part of Daraz’s story. We will be sure to treat everyone impacted with compassion and to lend as much support as we can.

I ask everyone who is staying to be supportive as we go through the transition this week. Next week we will re-group and focus on the tasks ahead. The leadership team and I will update you more frequently for the coming weeks and months to start the year with the best possible setup.

Is Alibaba ever going to recover?

Alibaba Group dismissed 9,241 employees from the total workforce of 245,700 due to poor performance in June last year. Over the last six months, the company has reduced its payroll by 13,616. Alibaba fell significantly in 2022, a development that caught potential investors’ attention.

However, since the United States imposed new regulations on the sale of technology to China, the broader Chinese tech space has suffered, and Alibaba will undoubtedly be affected.

This is because it is a direct supplier of semiconductor technology, but Internet companies also rely on US semiconductor technology to advance their services and platforms.

Regulatory issue is said to be the main cause of its stock drop because, in late August, there were reports that Beijing and American regulators were finalizing an audit inspection deal. After this inspection, Alibaba’s stock dropped by 25% in 2022 and about 49% in 2021.

In addition, there are concerns about the Chinese economy due to problems in the overly leveraged property sector, which has been a major driver of growth in recent years. The Chinese government has delayed the release of key economic indicators, which may indicate that things are still difficult, implying an intricate outlook for e-commerce players like Alibaba.

As Alibaba is set to prepare its company for market reality, the stock buyers should remain hopeful that this will bring forth a fruitful outcome.

Read More; Alibaba makes record $28.6Bn revenue in Q4 but still posted first loss in 7 years due to China fine