FB Pixel no scriptIs Shopee a villain or victim in this turbulent economy? | KrASIA

Is Shopee a villain or victim in this turbulent economy?

Written by KrASIA Connection Published on   3 mins read

Against a backdrop of macroeconomic uncertainty, the e-commerce giant is taking drastic measures to cut losses.

E-commerce platform Shopee came under fire on social media recently for rescinding job offers and inconveniencing overseas employees who had already uprooted their lives to relocate to the platform’s Singapore-based headquarters.

The uproar was triggered by a social media post on Chinese social networking platform Maimai in late August. The writer of the post expressed his concerns over the revocation of his job offer, stating that he only learned of the fact after he had disembarked from the plane in Singapore with his family.

Several commenters chimed in with similar stories, citing experiences where they had resigned from current positions and terminated housing contracts in preparation for the new job, only to be informed by Shopee HR that the offer had been rescinded due to internal restructuring.

What were the events that led to this?

Scaling down

Downsizing began as early as June 2022, when CEO Chris Feng sent out a memo announcing mass layoffs. The memo stated that the ShopeePay and ShopeeFood teams in Indonesia, Thailand, and Vietnam would be affected, as well as those based in Mexico, Argentina, Chile, and Spain.

According to Feng, the decision was due to the need for prudent adjustments and optimization of resources in an uncertain economy.

The layoffs have now reached the company’s Singapore headquarters, with rising concerns over the possible dismissal of more international teams next.

The mass layoffs run contrary to Shopee founder Forrest Li’s aim to replicate the success of Taobao in Southeast Asia. When Shopee was founded back in 2015, the future seemed bright, with Li focused on expansion to compete with other major e-commerce players in the region.

That dream seemed alive even as early as last year, when Shopee had continued to step up recruitment, even when most major Chinese Internet companies had begun to scale down on hiring. Shopee remained a popular choice for users to buy goods online and attracted plenty of investment, together with companies like social media and e-commerce platform Xiaohongshu.

Part of its recruitment efforts involved poaching senior R&D personnel from China’s major tech giants, according to media outlet PingWest. The annual salary for P7-level technical personnel in Alibaba is reported to be between RMB 600,000 (USD 87,000) and RMB 1.5 million (USD 217,400), but Shopee offered a more attractive salary of RMB 2.2 million (USD 318,900), attracting a wave of Chinese engineering talent as a result.

However, the bubble finally burst. According to an industry insider, the layoff plans now involve rescinding the job offers of incoming employees who are ranked below account manager (AM) level. It’s been reported that those with rescinded offers would receive one month’s salary as compensation.

It seems Shopee isn’t the only company facing economic headwinds. James Tan, the managing partner of Quest Ventures, said in an interview with CNBC that business costs are getting higher as loan interest rates continue to rise. According to Tan, businesses in Southeast Asia are in for a rough ride that will last the next 18–36 months.

Other platforms such as Malaysia-based iPrice, Indonesia-based JD.ID, and mobile wallet LinkAja have also announced their own layoff plans.

An uncertain outlook

In May 2022, Shopee’s parent company Sea revised the annual revenue forecast for its e-commerce business from its original target of USD 8.9 billion to 9.1 billion down to USD 8.5 billion to 9.1 billion.

However, following the release of its semi-annual report, Sea said that it would suspend guidance on e-commerce revenue in 2022 to improve its focus on operational efficiency and the long-term sustainability of the business. This move made investors uneasy.

Shopee is still a healthy company, according to core indicators. Although it fell short of the market expectation of USD 1.88 billion, Shopee’s revenue in Q2 was USD 1.79 billion, a year-on-year increase of 51%.

However, this growth was mainly due to increasing transaction fees such as commissions, payment fees, and postage rates, which led to an increase in the company’s gross profit margin and revenue.

On a broader level, Sea also had its slowest growth in five years. With the global gaming market shrinking by 7%, earnings from gaming and digital entertainment arm Garena are also no longer as steady as before.

The slowing growth of e-commerce companies signals that it’s perhaps time for platforms like Shopee to adopt a more cautious and structured approach to how it conducts business. This, of course, includes how it deals with new hires—talent they surely won’t want to disappoint.

This article was adapted based on a feature originally written by Luo Li Xuan and published on LuoLiXuan (WeChat ID: luolixuan11). KrASIA is authorized to translate, adapt, and publish its contents.


Auto loading next article...