Shopee layoffs 187 employees in Indonesia, impacted by the global economic uncertainty

Sinta, news . 21 Sep 2022

Heaptalk, Jakarta — The holding company of Shopee, Sea Limited, announced to lay off 3% of Shopee staff in Indonesia, an anonym internal source reported to Bloomberg (19/09). The amount of 3% is equivalent to 187 of 6,232 employees. The layoff decision is a part of efficiency measures that must be taken after making adjustments through several changes to business policies.

“Global economic conditions require us to adapt more quickly and evaluate business priorities to be more efficient. This is a very difficult decision,” conveyed Radynal Nataprawira, Head of Public Affairs at Shopee Indonesia, as quoted by Bisnis.

Radynal did not explain the number of employees who have been laid off and the related division in its official statement. But, the cut-off process will be based on the Authority’s regulation where each subject will be granted with one month additional salary. Onwards, Shopee will focus on running the business through independent and sustainable growth amidst the current global economic uncertainty.

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Focus on Generating Cash Flow Speedily

Shortly before the layoff announcement at Shopee Indonesia, Sea co-founder Forrest Li spread an internal memo saying that its top management will not take any cash compensation until the company reaches self-sufficiency, reported by Vulcan Post (15/09).

Sea switches business travel to economy class flight fares with travel meal expenses limited to US$30 per day. The company also limits spending on hotel stays for business trips to US$150 per night and set aside reimbursement for meals and entertainment bills.

Li uttered that Sea is struggling in an era of rising interest rates, accelerating inflation, and a volatile market. He sees the issue is not a passing storm as this will likely occur in the medium term.

Further, Li said that with investors moving to safer investments, the company does not anticipate being able to raise funds in the market. Thus, Sea’s primary objective for the next 12 to 18 months is to generate positive cash flow speedily. With that, Li hoped the company can reduce losses and win back investors.

A week before that, Shopee exited Argentina’s market and shut down local operations in Chile, Colombia, and Mexico, while Garena laid off hundreds of staff in Shanghai (09/09). Separately, Shopee had also pulled out of France, Spain, and India only within months after launching operations in those markets.

Beforehand, Executive Director at Shopee Indonesia Handhika Jahja dismissed the news circulating that there would be layoffs of Shopee employees in Indonesia, reported by Kontan (15/06). Handhika said the adjustment steps taken in certain segments and markets are not involving Shopee Indonesia.

Moreover, Handhika conveyed that Shopee has employed thousands in Indonesia within various business lines including Shopee, ShopeePay, and ShopeeFood in which more than 50% of total employees joined since covid-19 pandemic.

Winter for Startups is Real

Major layoffs taken by Shopee add to the long line of startups that have axed their employees in 2022, spanning JD.ID, Zenius, TaniHub, LinkAja, Pahamify, and Mobile Premier League (MPL).

Most of all the startups blamed the global economic condition for the layoff wave. Global inflation itself is expected to increase in the long term as the bond market revealed that five-year inflation expectations are at the highest levels in decades.

Newly emerging companies are forced to reconsider their strategy one of which is to focus on running a sustainable business. The companies can no longer depend on investments to survive as the investors become more careful deploying their funds making the moment as cold as winter for startup environment. Obtaining capital is not as easy as before hence startups very cautious in managing fundamental well, clear operations, and transparent costs.