Alibaba-backed Daraz cuts 11pc workforce

Wednesday, Feb 08, 2023

KARACHI: Alibaba-owned e-commerce platform Daraz Group is reducing its workforce in the Indian subcontinent by 11 percent due to the “current market reality”, Chief Executive Officer Bjarke Mikkelsen said, suggesting job losses that could affect about 300 people.

Daraz confirmed to Reuters that the cuts will affect a base of 3,000 full-time regional employees.

A difficult market environment, the Ukraine crisis, supply chain disruptions, soaring inflation, higher taxes and fewer government subsidies were among reasons for the cuts, Mikkelsen told employees in a letter on Monday, which was also published on the company’s website.

" the last 12 months, the market environment turned and became extremely difficult with a war in Europe, huge supply chain disruptions, soaring inflation, increasing taxes and removal of essential government subsidies in our markets. Despite these headwinds, we are still growing our business and we have made big progress on our unit economics in the last 12 months. Essentially," Mikkelsen said.

"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."

Pakistan and Bangladesh are the group’s biggest markets, Mikkelsen told Reuters. It also operates in Sri Lanka and Nepal.

“Both Bangladesh and Pakistan have a similar number of staff impacted since both of them are similar in market size,” Mikkelsen said, indicating there would be 100 cuts from each of these countries.

Ehsan Saya, managing director of Daraz Pakistan told Reuters: “Our headcount in Pakistan was 1,300, out of which 11 percent were laid off."

Daraz, Pakistan's largest e-commerce retail platform, was founded in 2012 in Pakistan and acquired by Chinese giant Alibaba in 2018. It has 100,000 small and medium companies in Pakistan on its platform.

Mikkelsen said the company will now refocus on its core e-commerce business, simplify operations, and boost product innovation and automation.

He told Reuters that there would be no hiring freeze, especially in sustainable growth areas: “If this requires new hires for certain functions, we will be proceeding with them.”

Daraz would be looking into “digitising as many retailers as possible”, he said.

There was no immediate comment from Alibaba on the job cuts or its investment in Daraz. Daraz has boosted its active shoppers to more than 15 million now, from 3 million in 2018, Mikkelsen said in the letter.