Alibaba sheds nearly 10,000 employees in June quarter as the e-commerce giant cuts costs amid sluggish sales, slowing economy

  • A total of 9,241 employees left Alibaba during the June quarter, trimming the company’s overall personnel to 245,700
  • The reduced payroll reflects Alibaba’s renewed efforts to cut expenses and drive up efficiency, as the company faces a slowing economy in China

Alibaba Group Holding let go of nearly 10,000 employees in the three months ended June 30, when the e-commerce giant struggled with stagnating sales amid weak consumer spending and economic headwinds in China.

A total of 9,241 employees left Hangzhou-based Alibaba during that quarter to trim the company’s overall personnel to 245,700, down from 254,941 at the end of March and 254,702 as of June 30 last year. That put the total decrease in employee numbers for Alibaba, owner of the South China Morning Post, to 13,616 over the six months to June, marking the firm’s first drop in payroll size since March 2016.

The reduced payroll reflects Alibaba’s renewed efforts to cut expenses and drive up efficiency, as it faces continued regulatory pressure, sluggish consumption and a slowing economy in China, the world’s biggest e-commerce market.

By contrast, Alibaba a year ago was pushing to expand its headcount, as the firm doubled down on operations like Freshippo – the group’s proprietary retail chain for groceries and fresh goods. From September to December 2020, the firm’s employee numbers more than doubled to 252,084, from 122,399, as Freshippo sales posted double-digit growth for the first time.

Cutting some headcount and noncore activities could help Alibaba sharpen its focus on its core businesses and strengthen its profit margins, according to Cheng Yu, a researcher at the Beijing Kandong Research Institute.

“Alibaba has many businesses which are difficult to make a profit on and do not serve its core businesses,” Cheng said. “It is essential to eliminate such businesses so that the company can reduce cost and increase efficiency.”

On Thursday, Alibaba reported a 50 per cent drop in net income to 22.74 billion yuan (US$3.4 billion) in the June quarter, down from 45.14 billion yuan in the same period last year. Revenue was basically flat at 205.56 billion yuan last quarter, compared with 205.74 billion yuan a year ago.

Still, Alibaba chairman and chief executive Daniel Zhang Yong said later on the same day that the company will add nearly 6,000 fresh university graduates to its headcount this year, as part of efforts to balance cost optimisation and control.

In May, Alibaba was said to have started letting go of employees through several rounds of job cuts at business units that include Taobao Marketplace, DingTalk and Alibaba Cloud, according to a report by Economics Weekly, which cited unnamed company sources.

That was the same month when a new wave of job cuts hit other major Chinese technology companies, including Tencent Holdings, amid continued regulatory pressure and China’s rigid Covid-19 lockdowns.

Last December, Alibaba unveiled its biggest management reshuffle in line with chief executive Zhang’s drive to make the firm more agile and gain strategic clarity. The following month, the group restructured the back-end operations of its core Chinese online retail platforms Taobao and Tmall.

Although its cloud business is considered a new growth engine for Alibaba, this unit’s revenue growth slowed to 10 per cent last quarter, compared with a 20 per cent increase in the December quarter and 12 per cent gain in the March quarter.

On potential personnel cuts at Alibaba Cloud, Zhang Chengyu, who heads the Enterprise Digital Centre at research firm Analysys, said the enterprise remains a promising business. Alibaba Cloud, for instance, remains the biggest cloud services provider on the mainland.

“The trend of digital transformation of enterprises is irreversible, although it is affected by the macroeconomic cycle and microeconomic environment, resulting in fluctuations in growth rate,” Zhang said.

Author: Ann Cao, SCMP

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