E51 – The Impulso Podcast – Lazada layoffs: lessons from history and Jack Ma

“The empire, long divided, must unite; long united, must divide. Thus it has always been.” 

The opening line from the 14th-century Chinese novel Romance of the Three Kingdoms above probably resonates well with the considerations behind the recent Lazada layoffs.

The line, which described ancient empires, is applicable to large companies with complex operations – such as Lazada. Certain circumstances may require minimum division of responsibilities or decision making, but after a while such structure will grow rigid, and circumstances will change, causing the pendulum to swing towards centralisation. 

In the dynamic ecommerce landscape, the pendulum inevitably oscillates between centralisation and decentralisation – organisations need to be agile to navigate these shifts.

Yet, this shift comes with its set of challenges – in this situation, it is having to lay off employees.

Tune into the latest episode of the Impulso Podcast – E51: Lazada layoffs: lessons from history and Jack Ma where we dissect these additional details and hopefully provide an optimistic outlook about 2024 for everyone. 

Listen to the full podcast here:

Also available on Apple podcast.

Featured materials:
What’s behind Lazada layoffs, The Impulso Podcast
How strong is Pinduoduo’s execution?, TheLowDown
Why is Pinduoduo’s execution so strong?, TheLowDown
With big layoffs, Lazada is digging in, TheLowDown
Seeing the Unseen, Behind Chinese Tech Giants’ Global Venturing, Guoli Chen and Jianggan Li
How Jack Ma handles big layoffs?, TheLowDown

[AI generated transcript] 

Sabrina  00:00

Hello, everyone. Welcome back to the Impulso Podcast. Today I’m joined by Jianggan and we’re going to be doing a part two of our Lazada layoffs

Jianggan  00:09

No, no Lazada is not going to lay off people for the second part

Sabrina  00:16

We’ll talk abit more about what’s happening with the Lazada layoffs. So last week, we released an episode called “What’s behind Lazada layoffs” where we dove into the strategic reasons behind Lazada’s recent layoffs, as well as the complexities of Lazada’s operations in the region and the intensifying competition in Southeast Asia. 

So if you guys are interested, you can find the link to that episode below. And since last week’s episode, a lot of listeners have actually reached out to us right Jianggan? You’ve spoken to a lot of people?

Jianggan 00:47

A lot of people have reached out to me after listening through the podcast. And it’s actually quite interesting, because that includes people who are from Lazada who were being impacted. People for Lazada who are still there,  to people from Shopee who are looking at it from a different lens. And of course, some people from China, from Bytedance, like ask me, Hey, what the heck is going on? And should we try to hire some people? So of course, a wealth of different perspectives. And I think over the weekend, a lot more information emerged about the details of the layoffs, right.

Sabrina  01:24

Yes. So over the weekend, there were a lot more articles and a lot more information has emerged. So just a quick summary, firstly, amongst the people retrenched it actually included all six of the Chief Marketing Officers of Lazada. And many other C suite executives have also been let go as well, including the chief executive officer, and the chief Logistics Officer of Lazada Malaysia. 

Secondly, Lazada also announced that they shut down Lazmall in Vietnam. So for those of you who are not familiar with last mall, it’s actually the online shopping platform operated by Lazada, where customers can find a curated selection of international and local brands from reputable retailer and resellers, Lazada’s version of Tmall. 

And thirdly, in Singapore, the union, which represents Lazada workers, has also stepped in stating that Lazada initiated the layoffs without consulting the union. So as you can see a lot more information has emerged. And I think even before the layoff, Lazada had around 10,000 employees.

Jianggan 02:29

That was the that was, I think came from some reports saying that, okay, Lazada had about 10,000 employees before the layoff. And some reports also said that up to 30% of the people are laid off. I did a brief check on LinkedIn, and based on LinkedIn data, Lazada has like 20,000 people who would list Lazada as their job profile. But of course, there could be people who work with Lazada, people from different ecosystem, different parts of the ecosystem who have overlaps with Lazada. I think the 10,000 number is probably plausible, Shopee has more than that. 

But, I think I just want to put things in a little bit of perspective. Alibaba, as a group as a whole, has an employee count of about 230,000 employees. So that’s 23 times that of Lazada. JD, used to be the second and I think now the third largest ecommerce platform in China. They have close to 600,000 employees. And if you remove the logistics part of JD, which almost 400,000 employees, I’ve been into their warehouses is huge operations. It still works out to be about 200,000, which is not that far for Alibaba. And here I’m going to say something scary like Pinduoduo, the company which also runs Temu has an employee count of 13,000. So it’s only 30% larger than Lazada, before the retrenchment and Pinduoduo now has a market cap that’s higher than that of Alibaba. So we put these numbers in perspective. You start to I think, not really understand the calculations of the Alibaba leadership, but the urgency that they have, right, I mean, look at this organisation, which is doing a lot more or, sorry, which is doing very well in growing their GMV in profitability, and they’re so small. 

Yes, super efficient, to the point that it becomes very scary. I think we talked about Pinduoduo and Temu in some of our episodes, I think we should talk more about them because there’s still a lot, a lot of different elements of the operations which we haven’t touched upon. But collectively, this is a formidable organisation. But today we’re not talking about Pinduoduo. Right.

Sabrina  04:55

Like you mentioned Pinduoduo was really a very efficient organisation. And I think Alibaba as a group has realised the need to become very efficient as well which is why in their latest earnings call, we hear them talk a lot about AI, and how AI will shake up ecommerce. 

So what do you think? When do you think AI will shake up in commerce? And how do you think this will help improve the efficiency of the organisation?

Jianggan  05:19

When? nobody knows, right? So when generative error first came out, no, when chatGPT first came out about a year and six weeks ago. Its only a year and six weeks, okay. Yeah, we’ve all been sort of trying to save some time with chatGPT plus and stuff. But anyway, so when that came about, people initially were shocked and then they had high expectations. When they realised that okay, certain things are not as good as they thought it will be. Then, of course, the, the expectations would dive and as some point of time people start to realise, hey, it actually works in specific scenarios or use cases. So that’s the hype curve, right? Things get hyped up, then nobody pays attention anymore, and then things get properly developed. 

So as far as AI for Ecommerce is concerned, nobody knows for like how long it will take, or whether how much potential you will unleash. But the question, I mean, the problem is that, I mean, you are in a competitive environment, you have a lot of competitors. And you don’t want to be stuck in a situation where it’s proven to be game changing, and your competitors are seizing opportunity, and you are not. So Alibaba as a group, as you mentioned, Sabrina, so they mentioned in that last earning earnings call the term AI 48 times and GMV only 8 times. So that showed a lot of commitment about artificial intelligence. And, probably they also saw it as a potential way to overtake their competitors.

And I think that probably trickles down to Lazada. Right? I mean, we want to reduce the workforce because a lot of the things that are done by ecommerce platforms are manual, right and uploading campaigns, designer banners, select goods, customer service, account management of plants and centres, etc. So there is lots of manual work, which theoretically could be replaced by generative AI and keeping your organisation lean probably allows you to seize the opportunity faster when it comes because you’re not bogged down with organisational issues. But of course, that’s theory, right. It has not been proven. But it’s good that they’re making the preparations to be ready for that.

Sabrina  07:56

I think zooming out a little bit on last week’s episode, we talked a little bit about Lazadas overall strategy, right. And we talked about centralisation versus decentralisation. So we also released an article last week called “With big layoffs. Lazada is digging in”, where we mentioned that the strategy behind the current layoffs seem to be centralising resource allocation, as well as some of the operational functions, which of course, this is different from their assessment two years ago, that they had a bulky regional team and not enough resources. So this is definitely because of the changing macro economics or the intensifying ecommerce scene in Southeast Asia. Right. And I think Jianggan, you have a quote from the Romance of three kingdoms on this situation. 

Jianggan  08:41

There was a book written in the 16th or 17th century about this part of history in China, and which was later adapted into a TV series of 80 episodes, because that’s the number of stories there. And I think the Japanese made some animes on that, which are quite funny. But anyway, so, the original novel called The Romance of Three Kingdoms had this line as the first line, the starting of the book, quote, The Empire long divided must unite long United must divide fast It has always been unquote. 

So which means that I mean, if you study history enough, you will notice that I think things go in cycles, sometimes division of responsibilities, decision making, etc, is more suitable for the circumstances. But after a while, such structure will grow rigid, and circumstances will change that cause for the pendulum to swing towards the other direction, which is united, union, right, and back and forth over the course of history. 

So, obviously, we talk about I mean two years ago, they thought I mean the regional office was too bulky and they need to give more power to the ground and now it has swung back to regionalisation or centralisation. So, this is also a topic that has been discussed extensively by business sort of gurus and the professors at business schools. 

So I was working when I was working with a prof Chen of INSEAD for a book about Chinese tech ventures, global venturing where we, we had a chapter organisation and and professor was telling me that Oh, organisation is the topic which has been really thoroughly studied in academia, focused on business. He said, essentially, there are three issues, right? decision rights, information communications, and resource allocation. So these are the three issues that the organisation’s always juggle about, I mean, whether they should give it more to the ground or whether it should centralise more, and I think there’s no right or wrong. So it really depends on how you assess the circumstances, and how you make your organisation really adaptable to the circumstances, as well as the potential changes to the circumstances.

Sabrina  11:14

Yeah, I think that links to what you mentioned, as well, that sometimes you swing from having to do centralisation to decentralisation. And I think when it comes down to it, it’s really how agile the organisation itself is to be able to make this swing. 

Right. So of course, with the recent news of Lazada, layoffs and everything, there’s been a lot of discussion on LinkedIn as well, people are talking about it. And there’s a lot of people asking, do you think these ex employees of Lazada were overpaid? And now that they’re out in the market, they wouldn’t be able to find jobs that are willing to pay them as well? What are your thoughts on this?

Jianggan 11:51

First I know many of these people personally, and I think, I mean, I’m not glossing over things, but I do know them personally, I think they are individually very very capable, many of them. So to a certain extent, I always felt that at least at mid to senior level, individual managers of Lazada are more capable compared to some of their competitors. What has held Lazada back is largely organisational, but anyway, so there’s lots of talk about people saying that, Oh, these people are overpaid. And enter, they might not be able to find jobs that will compensate them as much as Lazada would have. Personally, I think. I don’t agree with this assessment. And I don’t think this is an issue at all. Because the same assessment has been said, I think last year, uh, when Google and Facebook had retrenchments.

Sabrina  12:47

I think when a lot of tech companies were having retrenchment, this was kind of a sentiment in the market, right, that they overpaid for so long.

Jianggan  12:54

Its usually by people who I don’t know try to get into tech and didn’t manage to, sorry, maybe a bit mean to say that. But also not only in tech, right? I mean, last year, there was another event. I’m not sure if you guys remember, UBS absorbed Credit Suisse. And I think a lot of people at Credit Suisse were laid off. And also there was a bit of discussion about okay, of whether these people were overpaid, Credit Suisse was very, very comfortable. And where to get out, can you find good positions. I personally know a few of them and now they’re pretty, I mean, I wouldn’t say comfortable, but, but they find their footing. They are doing meaningful things in other organisations where they can leverage their strengths and their connections. 

So the same can be said about I mean, people who are leaving Lazada for whatever reason, not sure if you guys been following the WhatsApp group set up by ex employees of Lazada, Malaysia, and there’s tremendous, tremendous amount of camaraderie there. And there’s lots of people coming in to recruit, I mean, from organisation like TikTok, I think other parts of bytedance, to the local conglomerates, to even the growth stage startups. So I think the opportunities are there. Southeast Asia as a region has not reached a stage where you have an oversupply of tech executives, as China might have, might have reached that stage. But, I do think that, whoever that’s capable of whoever has been through the experience of Lazada, willbe able to find something. I mean, also, at the end of the day, the large company is trying to transform in this region is much bigger ecosystem and compared to Lazada.

Sabrina  14:37

And I think, I mean, this layoffs affect the people who’ve been laid off a lot, right, but I think it also has some impact on the staff who are remaining and last year we wrote an article about Sea groups layoff as well, where we mentioned a lot about the importance of leaders having to communicate and boosting morale for the staff who are remaining right because for those who are left and for those who executed the layoffs left,  the employees remaining in Lazada and the leaders who had to let go of these people, it wasn’t easy for them as well. Right. So now I think it’s really about boosting morale, reassuring the employees.

Jianggan  15:20

Look, I, when I was running companies for Rocket Internet many years ago, I personally like no initiated and handled three layoffs. And I can tell you that it’s never easy, right? I mean, people will blame the people making the decisions as being cold hearted and capitalist or whatever. But at the end of the day, if you’re working with human beings yourself, I mean, you can’t deny there are bastards out there, but for most people, it’s not easy to execute layoffs. And the thing is that you also have a tremendous obligation to people who remain because you still need them to build a business. And now with a small organisation, many of them would have to take more tasks.

And I do hope that this round of layoff Lazada seems very drastic, so they will not run into a situation that Shopee faced. They did like a few rounds of layoffs. Yeah, that definitely hurts the morale. The worst I’ve seen is a friend of mine, who is a general manager of an oil and gas company. You remember, there was a period of time when oil price was severely depressed. Over three and a half years, they did 11 rounds of layoffs, 11 rounds. So there was once he was passing by Singapore, we had drinks, and he got terribly drunk. He said, Man, I really don’t know how to handle this anymore. I really don’t know. I mean, facing the people who are still in the office, what do I tell them? Because I don’t know whether we will another round. 

But, you know, at the end of the day, I mean, the people who left most of them from good places to be the people who are still there, the oil market turned around. I mean, thanks to a few unfortunate events globally. And I think they are in a comfortable position. So short term scars, and hopefully not terms and people can remain optimistic. And talking about optimism

Sabrina  17:27

This brings us very nicely to an episode we released last Friday, we spoke with Keith Zhai, veteran journalist right and we discussed how to be optimistic for 2024. And his advice was to keep our expectations low. But of course, we also have a very optimistic take of layoffs from Jack Ma. So I’m going to be referring to, in 2020. We actually wrote an article about how Jack Ma handles big layoffs.

Jianggan  17:55

So we just quoted someone and it was as widely circulated,

Sabrina  18:01

circulated screenshot amongst tech executives, on the reasons different companies gives for layoffs.

Jianggan  18:08

Yes, yes, we translate that into English

Sabrina  18:10

I will link the article down below but I’ll just go into a few of the quotes so Huawei’s quote is give up on mediocre employees. For Tencent it was structural optimisation. Four Baidu it was encouraged the wolf spirit and eliminate the bourgeois 

Jianggan  18:28

Wolf spirit is something that some Chinese companies used to take home, used to pride themselves in, you need to act like a wolf, impacts, very aggressive. But of course, nobody talks about that now for obvious reasons.

Sabrina  18:44

NIO’s reason was partial optimisation to improve operational efficiency.

Jianggan  18:49

Do you know NIO? NIO is one of the largest EV 

Sabrina  18:53

Electric vehicle companies in China.

Jianggan  18:56

Yes, I’m checking the share price. Oh, my God, not doing well.

Sabrina  19:03

So we will not mention it. Another company iflytek reason was those employees who eat early need to be optimised. iflytek is a

Jianggan  19:11

it’s a company which started with a voice to text translation, and then they built all these devices that you know, recording pens and speakers, sorry, the microphones and pads and stuff, which basically help you deal with, a bit of AI to deal with the processing like the text and the documents. So iflytek was, I think, part of I mean, that’s a tangent but its also in a very competitive space in China. 

Sabrina  19:41

And of course, JD.com one of the the biggest e commerce companies

Jianggan  19:45

which had, like 600,000 people

Sabrina  19:49

Eliminate those employees who can’t fight because of lack of seminar. So they think that 600,000 of their employees have stamina, because they’re still there. 

Jianggan  20:01

They probably do, but I don’t know. Its a tough business.

Sabrina  20:05

We’ll see. Yeah. And of course, you don’t see the full picture until we have, the big picture till we see Jack Ma quote, which is a very, very positive, optimistic take on the US, right. So Jack Ma said, quote, From now onwards, every year, we will contribute to the society 1000 talented individuals who have worked at Alibaba for more than 10 years, unquote. So this is his very optimistic take on layoffs. 

Jianggan  20:33

But at the end of the day, I think this actually very relevant to us, right, because as we mentioned, the tech ecosystem in Southeast Asia, it’s still I mean, driven now it’s not right, we’re still very young. And there’s still a lot of room for growth, and not necessarily in the startups, but, but the whole digitisation still bring more opportunities. And I think people who are fortunate enough to have spent the last few years doing sort of important stuff at Lazada. And now they are in the ecosystem, I think there’s a lot more they can do moving forwards.

Sabrina  21:11

So I think that’s it for this episode of the podcast. So thank you for tuning in to another episode of The impulso podcast. We hope you enjoyed today’s episode. And if you did, do like our podcasts and follow us on Spotify, Apple podcasts or your preferred podcast platform to stay up to date on the latest happenings and trends in tech, new retail and the broader digital economy. Thank you and we’ll see you on Friday.

Jianggan  21:34

Stay strong, stay optimistic.