After job cuts by e-commerce firms, what's next for online shopping?

[The_King]

Each week, TODAY’s long-running Big Read series delves into the trends and issues that matter. This week, we look at what recent layoffs by e-commerce firms mean for the online shopping industry and consumers. This is a shortened version of the full feature, which can be found here.

• Layoffs by e-commerce firms Lazada and Shopee in the last two years have led some to question whether the heyday of online shopping could be over 
• Lazada had laid staff off to pre-empt future challenges such as a higher dependence on tech, and more complex marketing strategies
• Experts say, however, that the job cuts also signal an increased focus on making profits, rather than pursuing a ‘growth at all cost’ mindset
• They add that given the fast-changing nature of the industry and competition among the firms, a big player may eventually bow out
• Should that happen, then attractive discounts, low shipping costs that consumers enjoy now may be a thing of the past as competition dwindles

 

SINGAPORE — E-commerce firm Lazada’s surprise move to cut jobs last month not only left some affected employees in tears, but also raised the eyebrows of industry watchers here. 

Some of the former employees’ concerns have since been addressed with the provision of an additional undisclosed support package following talks between Lazada and the workers' union.

But for several business analysts and industry experts whom TODAY spoke to, the Lazada move begs a bigger question: Could the heyday of e-commerce — which had experienced a surge during the Covid-19 pandemic — be over?

Prior to Lazada’s sudden layoffs, its main competitor Shopee had also conducted three rounds of layoffs in 2022, in which staff in Singapore were affected. 

Experts have said that the pattern of layoffs from e-commerce firms echoes those by technology firms such as Meta, Google, Twitter (now X) and Grab, but Lazada, whose regional headquarters is in Singapore, has maintained that its situation is different.

 

 

A source close to Lazada told TODAY that these tech firms had perhaps overhired to gain market share, and retrenched when they had to focus on profits.

However, for Lazada, the layoffs are “a business transformation exercise”, said the source.

Responding to queries from TODAY, a Lazada spokesperson said the firm has been raking in healthy revenue.

“The numbers have shown that there has been no slowdown, it has been growing,” said the spokesperson. 

“But in the bigger picture, it also speaks to the evolution of the tech industry as a whole, because we are looking at companies who are left behind, and then have to make drastic cuts… Or like a company like Lazada who is looking to stay ahead of the curve.” 

TODAY had reached out to Shopee, the other main e-commerce player in Singapore, but it did not respond to queries.

Ili Nadhirah Mansor/TODAY Experts have said that the pattern of layoffs from e-commerce firms echoes those by technology firms such as Meta, Google, Twitter (now X) and Grab, but Lazada, whose regional headquarters is in Singapore, has maintained that its situation is different.

WHY IT MATTERS

Experts say that the e-commerce firms face different challenges compared to other tech firms. 

While tech firms like Google, Meta and Grab have all already dominated their respective markets, for e-commerce in Singapore and the Southeast Asian region, there is no obvious leader, said Dr Ng Weiyi, Assistant Professor from the Department of Strategy and Policy at the National University of Singapore (NUS) Business School. 

For instance, Google has dominated the search engine space and Meta the social media space with Instagram, WhatsApp, and Facebook. In Singapore, Grab has a predominant market share in the ride hailing space.

However, the main e-commerce players in Southeast Asia and Singapore, Lazada and Shopee, are still jostling for a dominant market share.

“Similarly, the parent companies expect Shopee and Lazada to dominate the e-commerce landscape, but the fact is that the landscape as of now is still very fragmented and saturated,” Dr Ng said. 

In addition, e-commerce firms have a less-robust revenue stream, while the other tech companies have either multiple or more reliable revenue streams. 

 

 

Professor Lawrence Loh, director of the Centre for Governance and Sustainability at NUS, said that for e-commerce firms, their ability to make money depends mostly on whether they generate enough demand from a “front-facing” customer, but this has become more difficult post-Covid-19. 

“Coming out of the pandemic, there’s a very obvious drop in demand for e-commerce, because people are showing up in brick-and-mortar shops again,” said Prof Loh.  

“The general economic environment is also not favourable, so disposable income is also less.” 

Tech firms, on the other hand, have more reliable sources of revenue. 

Both Meta and Google, for instance, are making megabucks from advertisements.

For Grab, it generates revenues through multiple streams, including advertisements, ride-hailing and delivery fees, and transaction fees when payments are made through its e-wallet. 

THE BIG PICTURE

 

 

Experts said that the challenges that most e-commerce firms have stemmed from the need to be profitable — gone are the days where companies are willing to splash money to gain market share. 

“The investment thesis underlying much of the industry — especially in Asia — that firms needed to position themselves early, lose money to acquire market share, and then make it up later with dominant positions and economies of scale, appears to be failing,” said Associate Professor Walter Theseira, an economist from the Singapore University of Social Sciences.

Thus, the focus and challenge that many e-commerce firms now face is in making profit. 

“I think this is the main reason why layoffs occur,” said Assoc Prof Theseira. “No firm would need to lay off workers if nobody cared about profits… Layoffs are all about improving the economic outcomes of the firm for investors and stakeholders.” 

Reuters On top of the rising cost of living, reducing consumers’ desire to spend, the e-commerce sector has also been hit by rising supply chain and shipping costs due to disruptions.

The need for profitability also comes amid a time when the e-commerce space is getting more crowded with competitors.  

“The competitive arena is now more intense, beyond Lazada and Shopee, now you have new kids on the block like Temu and Shein, and they bring new value propositions into the whole game,” said Prof Loh from NUS.

“(E-commerce firms) have to adjust their growth expectations accordingly.” 

Temu and Shein are online fashion brands from China. 

On top of the rising cost of living that has reduced consumers’ desire to spend, the e-commerce sector has also been hit by rising supply chain and shipping costs due to disruptions.

“The cost of supply is getting high, (including) labour cost, material costs, because of inflation… this adds to the pressure on the supplier and they will pass the costs back to the consumer,” said Prof Loh. 

THE BOTTOMLINE

What will these challenges to the e-commerce industry mean for consumers?

Despite signs that the e-commerce sector is beginning to generate sustainable revenues, experts are doubtful that the industry in the region will maintain its status quo in the near future. 

The current state of competition in the e-commerce market in Southeast Asia will likely lead to a “lose-lose” situation for firms, said Prof Loh.  

“There’s really so much (e-commerce firms) can do but to go low on prices,” he said, noting that consumers are usually not loyal to any platform and thus will choose the one that offers the most attractive deals and lowest shipping costs. 

Reuters Despite signs that the e-commerce industry is beginning to generate sustainable revenues, experts are doubtful that the industry in the region will maintain its status quo in the near future. 

Agreeing, Dr Ng from NUS said that even amid a climate where profits are the priority, firms will be reluctant to cut back on offers and discounts as they will fear losing out to their competitors. 

“It's a Catch-22, If I’m (an e-commerce firm) and I skip the next 3.3 sale, for example, and (a competitor) does not, while this might aid the bottom line in the near future, it will make me lose market share in the long term. Is this a good outcome?"

A "3.3" sale refers to specific sales events that occur on March 3, but can also occur on any date which the number of the day matches that of the month. It is typically chosen by e-commerce firms to offer discounts and attract new customers. 

While this is good news for consumers who may enjoy lower prices, this may not last, given the fast pace of change in the e-commerce sector.

Experts do not rule out a situation where one big e-commerce firm may bow out due to the fierce competition that still rages in the e-commerce arena here and in the region. 

They pointed to a similar situation involving Grab and Uber in the 2010s. The ride-hailing firms were caught in a price battle after entering the Singapore market in 2013, offering various promotions and discounts for commuters and incentives for drivers. 

However, Uber eventually decided to exit the Southeast Asian market, and sold its operations to Grab in 2018.

Should one e-commerce firm end up like Grab and become a dominant player in the industry, it is the customer that will lose out, said Dr Ng.

“The moment someone bows out, discounts stop… This is a reflection of the venture capital strategy, the moment we dominate the market, we shift gears, focus on profitability, and stop subsidising the consumers." 

[XianGe]

After chop, either offshore or bring in cheaper faster better employees 

[socrates469bc]

16 hours ago, The_King said:

Each week, TODAY’s long-running Big Read series delves into the trends and issues that matter. This week, we look at what recent layoffs by e-commerce firms mean for the online shopping industry and consumers. This is a shortened version of the full feature, which can be found here.

• Layoffs by e-commerce firms Lazada and Shopee in the last two years have led some to question whether the heyday of online shopping could be over 
• Lazada had laid staff off to pre-empt future challenges such as a higher dependence on tech, and more complex marketing strategies
• Experts say, however, that the job cuts also signal an increased focus on making profits, rather than pursuing a ‘growth at all cost’ mindset
• They add that given the fast-changing nature of the industry and competition among the firms, a big player may eventually bow out
• Should that happen, then attractive discounts, low shipping costs that consumers enjoy now may be a thing of the past as competition dwindles

 

SINGAPORE — E-commerce firm Lazada’s surprise move to cut jobs last month not only left some affected employees in tears, but also raised the eyebrows of industry watchers here. 

Some of the former employees’ concerns have since been addressed with the provision of an additional undisclosed support package following talks between Lazada and the workers' union.

But for several business analysts and industry experts whom TODAY spoke to, the Lazada move begs a bigger question: Could the heyday of e-commerce — which had experienced a surge during the Covid-19 pandemic — be over?

Prior to Lazada’s sudden layoffs, its main competitor Shopee had also conducted three rounds of layoffs in 2022, in which staff in Singapore were affected. 

Experts have said that the pattern of layoffs from e-commerce firms echoes those by technology firms such as Meta, Google, Twitter (now X) and Grab, but Lazada, whose regional headquarters is in Singapore, has maintained that its situation is different.

 

 

A source close to Lazada told TODAY that these tech firms had perhaps overhired to gain market share, and retrenched when they had to focus on profits.

However, for Lazada, the layoffs are “a business transformation exercise”, said the source.

Responding to queries from TODAY, a Lazada spokesperson said the firm has been raking in healthy revenue.

“The numbers have shown that there has been no slowdown, it has been growing,” said the spokesperson. 

“But in the bigger picture, it also speaks to the evolution of the tech industry as a whole, because we are looking at companies who are left behind, and then have to make drastic cuts… Or like a company like Lazada who is looking to stay ahead of the curve.” 

TODAY had reached out to Shopee, the other main e-commerce player in Singapore, but it did not respond to queries.

Ili Nadhirah Mansor/TODAY Experts have said that the pattern of layoffs from e-commerce firms echoes those by technology firms such as Meta, Google, Twitter (now X) and Grab, but Lazada, whose regional headquarters is in Singapore, has maintained that its situation is different.

WHY IT MATTERS

Experts say that the e-commerce firms face different challenges compared to other tech firms. 

While tech firms like Google, Meta and Grab have all already dominated their respective markets, for e-commerce in Singapore and the Southeast Asian region, there is no obvious leader, said Dr Ng Weiyi, Assistant Professor from the Department of Strategy and Policy at the National University of Singapore (NUS) Business School. 

For instance, Google has dominated the search engine space and Meta the social media space with Instagram, WhatsApp, and Facebook. In Singapore, Grab has a predominant market share in the ride hailing space.

However, the main e-commerce players in Southeast Asia and Singapore, Lazada and Shopee, are still jostling for a dominant market share.

“Similarly, the parent companies expect Shopee and Lazada to dominate the e-commerce landscape, but the fact is that the landscape as of now is still very fragmented and saturated,” Dr Ng said. 

In addition, e-commerce firms have a less-robust revenue stream, while the other tech companies have either multiple or more reliable revenue streams. 

 

 

Professor Lawrence Loh, director of the Centre for Governance and Sustainability at NUS, said that for e-commerce firms, their ability to make money depends mostly on whether they generate enough demand from a “front-facing” customer, but this has become more difficult post-Covid-19. 

“Coming out of the pandemic, there’s a very obvious drop in demand for e-commerce, because people are showing up in brick-and-mortar shops again,” said Prof Loh.  

“The general economic environment is also not favourable, so disposable income is also less.” 

Tech firms, on the other hand, have more reliable sources of revenue. 

Both Meta and Google, for instance, are making megabucks from advertisements.

For Grab, it generates revenues through multiple streams, including advertisements, ride-hailing and delivery fees, and transaction fees when payments are made through its e-wallet. 

THE BIG PICTURE

 

 

Experts said that the challenges that most e-commerce firms have stemmed from the need to be profitable — gone are the days where companies are willing to splash money to gain market share. 

“The investment thesis underlying much of the industry — especially in Asia — that firms needed to position themselves early, lose money to acquire market share, and then make it up later with dominant positions and economies of scale, appears to be failing,” said Associate Professor Walter Theseira, an economist from the Singapore University of Social Sciences.

Thus, the focus and challenge that many e-commerce firms now face is in making profit. 

“I think this is the main reason why layoffs occur,” said Assoc Prof Theseira. “No firm would need to lay off workers if nobody cared about profits… Layoffs are all about improving the economic outcomes of the firm for investors and stakeholders.” 

Reuters On top of the rising cost of living, reducing consumers’ desire to spend, the e-commerce sector has also been hit by rising supply chain and shipping costs due to disruptions.

The need for profitability also comes amid a time when the e-commerce space is getting more crowded with competitors.  

“The competitive arena is now more intense, beyond Lazada and Shopee, now you have new kids on the block like Temu and Shein, and they bring new value propositions into the whole game,” said Prof Loh from NUS.

“(E-commerce firms) have to adjust their growth expectations accordingly.” 

Temu and Shein are online fashion brands from China. 

On top of the rising cost of living that has reduced consumers’ desire to spend, the e-commerce sector has also been hit by rising supply chain and shipping costs due to disruptions.

“The cost of supply is getting high, (including) labour cost, material costs, because of inflation… this adds to the pressure on the supplier and they will pass the costs back to the consumer,” said Prof Loh. 

THE BOTTOMLINE

What will these challenges to the e-commerce industry mean for consumers?

Despite signs that the e-commerce sector is beginning to generate sustainable revenues, experts are doubtful that the industry in the region will maintain its status quo in the near future. 

The current state of competition in the e-commerce market in Southeast Asia will likely lead to a “lose-lose” situation for firms, said Prof Loh.  

“There’s really so much (e-commerce firms) can do but to go low on prices,” he said, noting that consumers are usually not loyal to any platform and thus will choose the one that offers the most attractive deals and lowest shipping costs. 

Reuters Despite signs that the e-commerce industry is beginning to generate sustainable revenues, experts are doubtful that the industry in the region will maintain its status quo in the near future. 

Agreeing, Dr Ng from NUS said that even amid a climate where profits are the priority, firms will be reluctant to cut back on offers and discounts as they will fear losing out to their competitors. 

“It's a Catch-22, If I’m (an e-commerce firm) and I skip the next 3.3 sale, for example, and (a competitor) does not, while this might aid the bottom line in the near future, it will make me lose market share in the long term. Is this a good outcome?"

A "3.3" sale refers to specific sales events that occur on March 3, but can also occur on any date which the number of the day matches that of the month. It is typically chosen by e-commerce firms to offer discounts and attract new customers. 

While this is good news for consumers who may enjoy lower prices, this may not last, given the fast pace of change in the e-commerce sector.

Experts do not rule out a situation where one big e-commerce firm may bow out due to the fierce competition that still rages in the e-commerce arena here and in the region. 

They pointed to a similar situation involving Grab and Uber in the 2010s. The ride-hailing firms were caught in a price battle after entering the Singapore market in 2013, offering various promotions and discounts for commuters and incentives for drivers. 

However, Uber eventually decided to exit the Southeast Asian market, and sold its operations to Grab in 2018.

Should one e-commerce firm end up like Grab and become a dominant player in the industry, it is the customer that will lose out, said Dr Ng.

“The moment someone bows out, discounts stop… This is a reflection of the venture capital strategy, the moment we dominate the market, we shift gears, focus on profitability, and stop subsidising the consumers." 

 

smlj experts, dont even understand the basics of biz or tech and still say ecom cannot make money.

 

the reason why ecom have to retrench is not becos cannot make money but becos they overhired on marketing and services, resulting in revenue not keeping pace with expenses.

 

after right-sizing and the employment of ai, do a ecom company  need so many marketing and services staff?????

 

if limpeh so old also buy limpeh's crocodile singlets and tat sing slippers online, u think physical shop can still survive meh???????

 

wahahahahahahahahahahahahahaha

[socrates469bc]

1 hour ago, XianGe said:

After chop, either offshore or bring in cheaper faster better employees 

 

just use ai, even cheaper.

 

wahahahahahahahahahahahahaha

[XianGe]

7 minutes ago, socrates469bc said:

 

just use ai, even cheaper.

 

wahahahahahahahahahahahahaha

 

Time to buy shares in tech doing ai... 

[ODACHEK]

No worries, PAP gov will create moar jiakliaobee jobs for sinkies...