Chinese e-retailers cut staff despite market boom
Summary: Small and mid-sized e-retailers have started sacking people before the Chinese New Year amid pessimistic forecasts for the year, but despite Internet sales surging another 65 percent in 2012.
After one of the country’s most prominent electronics retailers, Gome Electrical Appliance, last week announced that it would lay off 200 staff on its e-commerce platform Gome.com.cn, a number of other B2C (business-to-commerce) retailers in China have also followed suit.
With the Chinese New Year approaching, Qianpin, one of China’s top 10 group-buying sites, confirmed in a First Financial Daily report that the company had fired around 200 employees in a new round of layoffs executed at the end of 2012, accounting for almost 40 percent of Qianpin’s total headcount.
In 2011, the company announced that it had successfully attracted venture capital totaling 100 million yuan (US$16.1 million), touting “not-short-of-cash” as its recruitment gimmick.
Some of China’s local clothing brands also closed their online stores on Taobao Mall (TMall), the country’s largest B2C marketplace. Some companies hold negative views on the market outlook for 2013, and have laid off staff before the start of the year’s peak recruitment season.
At the same time, larger players, including 360buy.com and Suning.com, launched aggressive promotions in 2012, which pushed up overall costs for these smaller-sized e-retailers in attracting consumers and affected sales. This led to attempts by these retailers to reduce staff costs in a bid to survive in the market, according to the First Financial Daily report.
However, a report released by 100EC.cn on January 29 showed that the size of the Chinese online retail market reached 1.3 trillion yuan (US$209 billion) in 2012, representing a year-on-year increase of 64.7 percent. This indicated that the overall e-retail market maintained a “fast pace of development” in China.
But sales promotion wars between large e-retailers also brought up several issues in the market. Consumers would only make purchases when there are huge discounts, which further squeezed the margins of smaller players in the market, according to analyst Wang Zhouping from the China e-Business Research Center. He anticipated that more small and mid-sized e-retailers will implement staff layoffs or close down in early-2013.