KARACHI: Alibaba Group Holding Ltd’s Daraz Group in Pakistan is cutting 11% of jobs to weather a slump in online commerce, joining a growing roster of tech names retrenching to weather a global downturn, reported Bloomberg on Tuesday.
The Pakistani company, which Alibaba acquired from Rocket Internet in 2018, has quintupled active shoppers to more than 15 million over the past five years. But in 2022, that pace decelerated after the war in Europe and soaring inflation disrupted supply chains and economies, CEO Bjarke Mikkelsen said in a memo to employees posted on its website.
The decision was taken “to prepare the company for the current market reality and to ensure Daraz will thrive in the long term,” he wrotem adding “Despite these headwinds, we are still growing our business and we have made headway in our unit economics in the last 12 months.”
Daraz is among a clutch of private firms, including Lazada Group SA and Trendyol in Turkey, that represent Alibaba’s overseas foray. The Pakistani firm in 2021 said it aimed to double orders annually over the next five years, thanks to a dominant position in South Asian markets.
E-commerce giant Daraz Group operates in Pakistan, Bangladesh, Sri Lanka and Nepal.
According to reports, Daraz Managing Director Ehsan Saya told employees in Pakistan that “Daraz is restructuring to ensure we continue to grow in the future”.
“Given global economic conditions, we are ensuring that we invest in all the right priorities. We will continue investing in Pakistan and we are strong believers of this market, hence, we felt it is imperative that we reorganise our structure to scale and grow in the coming years,” added Saya.
Daraz Pakistan will continue to invest in product innovation across its platforms, the company said.
Saya also mentioned that in October last year, Daraz had invested in the region’s first smart distribution centres in Karachi and Lahore “as a testimony to build a sustainable future for e-commerce in Pakistan and we will continue to look for opportunities and investments that are aligned with our strategy.”
In his statement Mikkelsen said the firm was bidding farewell to many talented people. “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.”
He said that for the last five years, Daraz has been following its long-term business plan, increasing its active shoppers from 3 million in 2018 to more than 15 million, 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,” Mikkelsen told the employees.
However, he said in the last 12 months, the market environment turned and became extremely difficult with a war in Europe, supply chain disruptions, soaring inflation, increasing taxes and removal of essential government subsidies in the company’s 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, we are improving our services faster than that market can hold us back, and this makes me incredibly proud.”
“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,” he added.
Part of the plan to includes refocusing on the core business, simplifying the organisation and doing more with less in all departments, the CEO said.
“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,” he added.
As per its website, Daraz’s marketplace provides 40 million monthly active users access to 50 million products across 100 categories, working with 200,000 sellers.