Monitoring Desk
ISLAMABAD/ KARACHI: Alibaba Group Holding Ltd’s Daraz Group has announced to layoff 11 per cent of workforce in Pakistan to weather a slump in online commerce.
Daraz Chief Exective Officer Bjarke Mikkelsen announced on Wednesday that the company was slashing 11 per cent of its workforce.
Funds decline and Daraz layoffs
“Funding declined in the last quarter of 2022, causing job layoffs, starting with Daraz in Pakistan,” Topline Securities ICT analyst Nasheed Malik said while talking to the media. He said, “Startups have prioritized growth over cash flow and profitability, leading to a continuous cash burn.”
According to him, Daraz neglected revenues for the first 10 years as it concentrated on user acquisition during its inception period before switching its attention to app growth. However, because of Pakistan’s present economic crisis, the company had to fire employees from upcoming projects that had little to do with its main line of work, which was making money.
Startups limit themselves to primary business to maintain cash
“Startups in the country are now limiting themselves to their main business to maintain cash flow and profits, removing highly paid experts or reducing the workforce from future projects,” Malik said.
After the announcement, Daraz Pakistan Managing Director of Daraz Pakistan, Ehsan Saya, explained to employees, “Daraz is restructuring to ensure we continue to grow in the future.”
Daraz, a popular e-commerce platform and Alibaba Group subsidiary, operates in Pakistan, Bangladesh, Nepal, and Sri Lanka. Daraz was founded in 2012, and Alibaba acquired it in 2018. The group serves 500 million customers with a team of 10,000 employees, and it has 100,000 SMEs in Pakistan on its platform. Daraz has invested $100 million in Bangladesh and Pakistan in the last two years.
“Layoffs are likely to occur not just at startups or in the IT sector, but across industries owing to the current economic situation in Pakistan,” stated Alpha Beta Core CEO Khurram Shehzad.
He added, “There will be fewer layoffs in the IT sector while the axe will fall more on the specialized group than the low-skilled laborers.”
Daraz successfully changed consumer spending habits during the Covid-19 pandemic, when people moved towards digital platforms like Daraz, the closed Airlift, and Foodpanda for discretionary purchases,” said JS Global ICT analyst Waqas Ghani Kukaswadia.
But now, as consumers shift back to pre-Covid spending habits, online platforms need to be more staffed, causing massive layoffs.
“I predict more layoffs in the future due to poor economic conditions and an unstable rupee-dollar exchange rate,” said startup funding expert Kapeel Kumar. “These are exceptionally challenging times for the startups and the economy, and companies need to take painful steps.”
