E49 – The Impulso Podcast – What’s behind Lazada Layoffs

Yesterday (3 Jan), several media outlets reported that Lazada was carrying out a round of layoffs in Singapore. These layoffs were not unique to Singapore but also affected multiple other regional offices, including Thailand, Indonesia, and Vietnam.

In this latest episode of the Impulso Podcast, we delve into the behind-the-scenes of Lazada’s recent wave of layoffs and restructuring, highlighting the company’s objective to centralise functions and become more agile. We also discuss the complexities of Lazada’s operations in the region and explore the company’s potential new strategies to remain competitive in Southeast Asia’s e-commerce scene.

However, as we have emphasised multiple times before, success goes beyond strategy; it hinges on execution—the agility and efficiency of an organisation in executing strategies.

Listen to the full podcast here:

Also available on Apple Podcast – here.

Featured materials: 

Lazada cuts staff amid speculation of upcoming IPO, The Straits Times

Why does Alibaba replace Taobao CEO?, The Impulso Podcast 

Who is Temu, Momentum Works 

Temu has entered Southeast Asia, challenging Shopee, Lazada & TikTok Shop, TheLowDown

The winners and losers of the TikTok-GoTo deal, The Impulso Podcast   

[AI generated transcript] 

Sabrina  00:00

Hello, everyone, and welcome back to another episode of The Impulso podcast. So on today’s episode, I’m joined by Jianggann. And we’re going to be talking about the Lazada layoffs we see happening in the region.

 

Jianggan  00:11

This is our first episode of the year, right? Yes, it is now. I remember. But anyway, so we’re going to talk about some news, which, I think, has been interpreted negatively in the media. So Sabrina, you want to set the context? 

 

Sabrina  00:31

So I’ll set some context. So this podcast is about Lazada, which is the regional ecommerce platform owned by Alibaba. And it seems like on the first working day of the year, which was second January, multiple people in the organisation received invitations to talk to HR. And since yesterday, and even today, it seems like massive layoffs are going on. And the media has even picked up on this. So there was a straight time article on Lazada lay off a number of its Singapore staff. But of course jangan you know that this isn’t just happening in Singapore, right. You’ve heard that this layoff has been affecting multiple regional offices of Lazada. I

 

Jianggan  01:09

think. So we talked to people in different countries, they will tell you that it has happened in Thailand as well, our specific amount of people have been laid off. It is happening in Vietnam, and some some people got eight month, nine month salary as compensation. And I think Indonesia, the most famous startup meaning factory, on sort of the tech meme factory on Instagram, ecommerce also reported saying that Lazada is doing a major layoff after receiving money from Alibaba. So basically, media has been picking this up, and it is happening in multiple countries. So

 

Sabrina  01:46

it’s interesting that, you know, this is such a big round of layoffs, especially after like you mentioned, Alibaba actually pumped about US dollar 600 million into Lazada, at the end of the year. So what do you think is happening behind the scenes? And why do you think they are laying off so many people right now? I

 

Jianggan  02:03

would think that the first, I am not sure whether whether the layoff is exactly corresponding to the pre investment actually, it’s not really investment, right, because a lot of as a subsidiary of Alibaba, and it’s natural for the parent company to set aside a budget for the subsidiary, especially when NASA is not making money to sustain on its own right. So so and also you can expect all this money to be used to to be paying for for the compensation for the layoffs. So but I think we will look at everything that’s happening across different offices, you do see a strategy behind it, right. So there seem to be sort of cancelling software functions, which are previously or at the moment in each country. And so some of these functions might be like a bit repetitive, right? I mean, serving the same purposes. And they seem to be wanting to centralise many of these functions to the regional office, and so that, so that, potentially me in the current competitive landscape, they can actually direct resources in a more agile way.

 

Sabrina  03:15

Of course, over I think you mentioned just now two years ago, they had a different decision. And now they’ve sort of changed their position on how they should be competing with other players in Southeast Asia.

 

Jianggan  03:31

I’ve known that since 2012, since it was founded, and initially by rocket, the internet, then got lots of investment from different investors in 2016, he was so to Alibaba. And And initially, Alibaba said that, okay, we don’t have any, like no talent in our group, which can manage international businesses effectively. So we decided to respect the local management or the existing management, I think, I think of course, they have headquarters as well as the management had different opinions and different expectations. That led to I wouldn’t say a coup but massive overhaul in 2018 when co founder Lusophone came to Singapore to to basically repair replace a bulk of the existing management and a lot of experienced Alibaba executives foreign her to come to Southeast Asia to so then afterwards. I mean, you probably know the story that that the group replaced CEOs like four or five times and, and of course, lots of the reports are saying that are laughing a lot of us in the hahaha, they’re not getting a ride with and it’s so complicated is so, so, so chaotic, but But it’s probably worth to look at I mean, the challenge is facing this large organisation which was throughout this like 11 year history has been a bit of loss of legacy, right you have the you have the bit of culture from the existing route. So the previous remedy Rocket Internet management, who was basically trying to grow the company to a certain size and flip, and they had no intention to keep running the company forever. And since its original operations across Southeast Asia, which is by itself, a very complex region with different cultures and languages, local infrastructure, etc, etc. So, so they have a lot of different local specific structures been built. And on top of that, the Alibaba obviously brought its expertise. And its experienced personnel. Some of them are very committed to Southeast Asia, some of them not so much. But regardless, I think people have different understandings about how things should work. So over the years, you have accumulated this very, very complex organisation where there were lots of opinions, there were lots of people, but but not many people. Were calling the shots, right? Or nobody was really calling the shots and even a CEO was, you know, listening to opinions from different senior managers, and then try to do make or not make a meta decision that I think changed about two years ago, when, when John Phan the former president of Taiwan, Timo was tasked to manage the international businesses of Alibaba. So I don’t remember the two years ago when Java and some of his people came to Singapore. And back then there was assessment that Allah’s original office was too bloated. I mean, if you do a simple like cost analysis, you will realise that there are lots of people in original Singapore office and and they complain that many of these people don’t spend enough time in the market. And of course, if it’s in Singapore, that the payroll is pretty high, right? I mean, the cost that you have to pay people is pretty high compared to the other markets in Southeast Asia. So the complaint that Okay, so we have a very bulky headquarters, and we don’t have enough people on the ground to fight this battle. But of course, I think things have changed. I think

 

Sabrina  07:15

also, we’ve seen that over the past, the last year, especially the competitive landscape has really changed a lot in Southeast Asia, right, I mean, tick tock shop entered Southeast Asia and I think they were a lot more aggressive than ecommerce companies like Lazada and shopee expected. And so maybe Lazada. Part of this layoffs is also Lazzara trying to find the right direction for their organisation trying to push themselves so that they can compete more effectively with Tik Tok shop.

 

Jianggan  07:41

And also, I think, a recurrent theme for the last few years, which is discussed amongst some of the sort of ecosystem stakeholders is that how exactly should Plaza position itself right? It is, it is pretty apparent that if it wants to go through a Sharpie, or tick tock route, try to be the number one GMV try to, you know, occupied the different spectrums of different spectrum on different parts of the spectrum of ecommerce covering the massive maximum amount of customers as possible, is going to be pretty hard and very costly, because they are, I mean, shopping has already spent a lot of money and lots of resources to capture the sort of chip or savings kind of message, right? And it’s pretty difficult for us to, which has historically aligned a lot with with the brands to come to shopping, shoppers positioning and and data shop has a natural advantage. I mean, just the initial alone, they have I think 70 million daily active users, so you just compete. I mean, no matter how efficient your customer acquisition is, you just can’t compete against tick tock because they they don’t need to acquire customers, they have customers on their platform regularly. So when that happens, I mean, how should you position yourselves and it has, it has some advantages. Brands are still prefer to work with Asana. I mean, some brands are now working with Sharpie but but in terms of positioning, they know that okay, if they are in Lazada, they are less likely to be, I don’t know, placed next to I mean, if I’m like Nike original shoes and placed right next to a 1.5 dollar junk from a branded source, right, so, so I keep my brand positioning. And so brands will still want to work with them. And I think in terms of talent, Las Vegas has a lot of good talent and somebody who used to work at the senior level. A lot of the HR team was telling me that Lazarus talent quality is much better compared to shop it. I asked him why he said That’s sort of such complex organisation, if you are not good, you can’t even survive to politics.

 

Sabrina  10:10

A really, really big organisation

 

Jianggan  10:12

as well. Yeah. So I think you have good people, your professional people, but historically, because of the baggage that that company has accumulated, he has not been able to unleash. It’s, it’s, it’s basically capabilities. Well, so now, if you look at what’s happening is since you since that, whoever the decision maker is, and I think we will know who the decision maker is, wants to centralise the control and, and fight that battle, the battle might not be to be ticked or shop or, or to be choppy, the battle might be to occupy a certain segment of E commerce in a profit and profitable way high. I think that is, is possible, but, but the whole organisation needs to be aligned. And then they need to be able to deploy the resources effectively. And so far, I mean, if you, I was browsing through some of the comments on especially Indonesia, on different social media, when the newspaper layoff is being reported, you have so many complaints like people, I mean, people complain about the user experience, rather to be some people complaining about. So I’ve been talking to trying to talk to customer surveys, they don’t really respond to me. Some service providers were saying that I liked the people I was dealing with, but it seems that they don’t have any power to make any decisions. So there are lots of issues that that people have voiced out. And these are the issues, which are all organisational? Not exactly product related. Right. So. So I think, I think I think from the last leadership point of view, they know that this needs to be fixed. Now it comes to the question how they can fix it. Right? But But I think like you

 

Sabrina  12:00

say, jump fan orders, they have been at Lazada for a while now. Right? Maybe two to three years. So maybe now the decision leaders might have gotten to know the organisation better, and have a better understanding of not just the landscape, but as well, what they need to do to push the company in the right direction.

 

Jianggan  12:16

Yes, yes. Yes. And, and the timing is interesting, because it happens a year in the context of the whole sort of restructuring of Alibaba, which we’ll talk about in a previous episode, right? Yes. Yeah. And, and of course,in terms of scale, Lazada is much smaller compared to Alibaba, its business in China, and in terms of complexity is probably a little bit less complex. But still, it’s difficult undertaking, right? Because you have so many people with different different expectations. And you also have, and this is something that I mean, maybe maybe a bit comparable to Alibaba in China, they have multiple businesses, right? Lazar in Southeast Asia has multiple countries. And each country is different. Sol, sol, sol, sol Sol. Were trying to operate each country effectively. I mean, you basically are recreating a different structure in each country, which I think at this juncture, they seem to have have to come to a conclusion that it might not be the best, most effective way. And I’m not sure whether they have taken some inspiration from Timo because Timo now has been expanding to like 40 plus countries without without getting bogged down into the complexities. Lazada has lots of shopping, they are a platforms in the country, right? They deal with sellers, they deal with that they will traffic sources that deal with consumers that deal with service providers, etc, etc. So basically, they’re recreating an ecosystem in each country. But we’re looking at Timo, Tim, who just uses it, this does everything cross border. I mean, at one end, the merchants and manufacturers in China, they have strong control over and the data they try to export that into different countries. So it’s, it’s it’s a different methodology. And the in the short term, a team’s approach or visit allows them to move faster.

 

Sabrina  14:08

I think because the organisation is a lot less complex, they’re allowed to make decisions much faster. Yes, he is also in Southeast Asia. So they’re not they’re not like countries, I think the only and Philippines and Malaysia. So some extra competition for Lazada there as well. Yeah,

 

Jianggan  14:26

We know that the team is not focused in Southeast Asia for now, but who knows, right? Because this, this guys can show that if they want to be aggressive, they can be aggressive, and because of the organisation they can move things very fast. Whether it’s long term sustainable, is debatable, but in the short term, it can cause loss of time and damage in a competitive environment. So nobody can afford to take them lightly. And of course, there’s tick tock shop.

 

Sabrina  14:57

Yes, tick tock shop is still there. Yep.

 

Jianggan  14:59

and, and and they seem to be committed. And so after the after they have resolved the issue in Indonesia, it seems that on data shop has been on, on a good momentum, I mean, we, we won’t be surprised that if if they can make more more deals in multiple areas to make them more secure. And this is something that the competitors need to watch out for.

 

Sabrina  15:28

So you can definitely see that the competition for E commerce landscape in Southeast Asia is very, very tough. And with newcomers coming in, you never know how much more intense the competition will become. Right. So I think that’s why last year, that was sort of definitely sees the need to make that organisation a lot more streamlined, so that they can make decisions faster to react to all these new players.

 

Jianggan  15:51

And, and people I mean, and of course, when people usually perceive layoffs, they usually pursue their offices as I mean, because two years ago, there was that was it. Yeah, 2022, they will also layoffs, right. Because of the shifting environment in tech. And, of course, for large companies like Facebook and Google, they need to show to the investors that they have the interesting in mind, but for for many of the sort of unlisted or unprofitable startups, they really need to need it to lay off to survive. But I don’t think Alaska has I mean, things have evolved a lot since then. I don’t think Alaska has the pressure for survival. So they really need to figure out a proper strategy and being able to, I think they have the proper strategy, but they really have to figure out the organisation, how to make sure that they can execute things well. So so that’s a challenge they’re trying to resolve. And a last point, this is probably interesting lesson for many organisations, right? I mean, to think that the lady who the CEO of Alibaba said in the last earnings calls, right, right, I mean, things are changing. So they can’t, whatever made them successful in the past, is probably not no longer really relevant as organisation, they need to be agile and respond to the changes in a macro environment. And I think that applies to any organisation, any sector is just intact, everything happens much faster.

 

Sabrina  17:19

I like the point you made about execution, because I feel like that’s something we always talk about when we are looking at these platform companies. Right? That it’s not just about the strategy they have, but also consistent execution.

 

Jianggan  17:33

And the thing is that a lot of times that I mean, how can you execute consistently is really down to how your organisation is structured, because we have a lot of people communications becomes the issue, expectations becomes the issue, and how do you assess the results of execution? How do you make decisions, how do you get the right information? I mean, this all comes down to organisation. So it’s a very, very complex issue.

 

Sabrina  17:57

Okay, so I think that’s all for today’s episode of the impulso podcast. Thank you, and we’ll see you again tomorrow for another episode.