The global layoffs trend has now gripped Pakistani startups and the overall information technology sector as well as Daraz CEO Bjarke Mikkelsen announced in a statement that the company is slashing 11% of its workforce across the Daraz Group.
“In the last quarter of 2022, funding declined causing job layoffs, starting with Daraz in Pakistan,” Topline Securities ICT analyst Nasheed Malik said while talking to The Express Tribune.
“Startups have prioritised growth over profitability and cash flow, leading to a continuous cash burn,” he said.
During its startup phase, Daraz focused on customer acquisition and later shifted to app growth, neglecting profits for the first 10 years, he stated. However, with the current economic meltdown in Pakistan, the company had to lay off staff from its future projects that were not related to the core business which was generating income.
“Startups in Pakistan are now limiting themselves to their core business to maintain profits and cash flow, slashing workforce from future projects or removing highly paid experts,” Malik stated.
Following the announcement, Daraz Pakistan Managing Director Ehsan Saya explained to employees “Daraz is restructuring to ensure we continue to grow in the future.”
Daraz, a popular e-commerce platform and subsidiary of the Alibaba Group, operates in Pakistan, Bangladesh, Sri Lanka and Nepal. Founded in 2012 and acquired by Alibaba in 2018, it has 100,000 SMEs in Pakistan on its platform and serves 500 million customers with a team of 10,000 employees.
Over the past two years, Daraz has invested $100 million in Pakistan and Bangladesh.
“Layoffs are likely to take place 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 Schehzad.
“There will be less layoffs in the IT sector while the axe will fall mild on the specialised group than the low-skilled labourers.”
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 the consumers are shifting back to pre-Covid spending habits, it has left online platforms overstaffed, causing massive layoffs.
“I predict more layoffs in 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.”
Published in The Express Tribune, February 8th, 2023.
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