Lazada layoffs: does Alibaba have a bigger plan for e-commerce?

• According to reports, around 30% of Lazada employees will be axed in layoffs.
• Lazada is a subsidiary of the Alibaba Group.
• Alibaba Group also invested an additional US$634 million in Lazada to intensify its battle with its competitors in the region in December 2023.

The e-commerce industry continues to experience record-breaking profits globally. While the pandemic contributed to the growth and adoption of e-commerce, post-pandemic sales continue to be high. Apart from brands selling their products online, there are also hundreds of e-commerce platforms around the world, competing with each other to provide the best offers to customers.

In Southeast Asia, the digital economy was expected to hit US$218 billion in 2023. There have been reports that the growth rate of retail e-commerce sales in Southeast Asia, which includes Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam, declined from 21.6% in 2022 to 13.5% in 2023. Mounting global economic uncertainties are likely the reason for this.

E-commerce platforms in the region have also been investing in their offerings. This includes enhancing the customer experience as well as bringing in new features to the platforms to increase sales.

Currently, the top e-commerce platforms in Southeast Asia include Shopee, Lazada, Zalora, Tokopedia, Bukalapak, Carousell and Tiki. ByteDance’s TikTok Shop is currently the fastest-growing e-commerce player in the region, despite the challenges the company faced in 2023 in Indonesia.

Layoffs in the e-commerce industry

Despite its success, the e-commerce industry was not spared from layoffs. In 2023, almost all e-commerce platforms in the APAC region reduced their headcount. While competition has been regarded as the main reason, the increasing use of technology like AI in some roles has also contributed to the number of layoffs.

While it is only the beginning of 2024, Lazada has already made headlines for its drastic job cuts around Southeast Asia. According to a report by CNBC, Lazada employees from all levels across the region are affected. The same report claimed that hundreds could be affected – with the Singapore branch being the most impacted.

A spokesperson for Lazada Singapore did not confirm the layoffs but told CNBC that the company is “making proactive adjustments to transform its workforce, to better position itself for a more agile, streamlined way of working to meet future business needs.”

The layoffs – or “proactive adjustments” – at the e-commerce giant also came as a shock to the employees. According to reports, many employees were caught off guard by the announcement. Lazada currently has around 10,000 employees in the region.

Singapore’s CNA reported that Lazada Singapore had retrenched some workers last year, but that it was usually just a few people or a particular department that was affected. This time, staff from all parts of the company – and at all levels – have been affected.

Three employees who spoke to CNA described the layoffs as “unfair,” “opaque,” and “baffling,” adding that it has caused much anxiety and speculation among their colleagues due to the lack of transparency. They also said that the severance package was lower and worse than other tech companies such as Shopee and Grab offered to their employees who were laid off last year.

What caused layoffs in Lazada?

E-commerce platforms continue to evolve, offering new features and improving customer experiences. However, that’s not the case with Lazada, which is also one of the reasons why the app has been losing out to its competitors.

For example, Lazada’s main competitors – Shopee and TikTok Shop use shoppertainment as a means to boost their sales compared to Lazada. While the Lazada e-commerce app does support live broadcasts for sales and even has gamification features like those of its competitors, the response to them on Lazada has not been as great as it has been on some of those rival platforms.

At the same time, most e-commerce platforms today offer buy now pay later (BNPL) services, something that Lazada has yet to offer to its customers. For example, Shopee has its own BNPL offering, while other e-commerce platforms like Zalora partner with BNPL providers to give customers more payment options.

Alibaba has bigger plans?

The biggest possibility of the layoffs would be in the group’s management and direction as well. Lazada is a subsidiary of the Alibaba Group. The Alibaba Group has experienced a tumultuous 12 months. First, the group called off big plans for its cloud computing unit in November 2023. The group’s market value has also fallen drastically in the last three years.

Interestingly, in December 2023, Alibaba Group also invested an additional US$634 million in Lazada to intensify its battle with its competitors in the region. So, if the parent company has invested heavily in Lazada, then why is it conducting layoffs?

According to a report by The Financial Times, company insiders and analysts said that Alibaba has so far failed in combating aggressive new competitors effectively, keeping abreast of AI developments and capitalizing on its strengths in domestic e-commerce to succeed in Western markets.

The Financial Times also spoke to nine Alibaba employees, who painted a picture of a flailing enterprise trying to chart a new course after canning crucial planks of an ambitious restructuring plan that was supposed to revive its fortunes.

It remains to be seen what other plans Lazada has for its e-commerce journey beyonf these layoffs. But one thing is certain: the e-commerce industry remains a highly competitive and profitable industry, and without the right formula for success, platforms like Lazada may take longer to be as successful as their competitors.

Apart from Lazada, in 2023, Shopee laid off around 500 employees in its Indonesia unit, while Tokopedia saw around 600 employees laid off in the country. Zalora, by contrast, has been able to maintain its workforce and remain profitable despite the increasing competition.

 

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