DHGate.com, a wholesale trading platform targeting small and medium sized-companies is rumored to shed 50% of employees across the board.

A former DHGate staff leaked out the news, saying headcount of the B2C site would down to no more than 400 from about 1000 after the stealth downsizing. The tipster also disclosed that DHGate is running low on cash while a new round of funding is far off.

Founded in 2004, DHGate has long proclaiming itself as the 2nd generation of B2B service to differentiate from Alibaba, what the company called the 1st generation B2C site.

By 2nd generation B2B, DHGate means it’s facilitating trading from both online and offline part by seamlessly integrating everything in the whole process of foreign trade including not only items listing but also recommendation of trusted payment methods and logistics service, which are missing from Alibaba according to DHGate and if you believe so.

One thing small businesses love about DHGate is, you can list items on the site free of charge, while other B2B sites like Alibaba, Globalsources.com require membership fee starting at RMB 10K ($ 1.5K) or so, which might be a burden for small companies.

DHGate partnered with UPS to provide logistics service for its customers.

The Beijing-based company generated RMB 6B ($ 938M) in transaction in 2010, and is targeting RMB 10B ($ 1.5B) for this year.

A PR person at DHGate said that the company it is downsizing, but no where near 50%.

Failed In Raising?

According to its CEO Wang Shutong, the former Chief Executive of Joyo.com (Amazon China), DHGate raised a total of RMB 300M ($ 46M) in three rounds (in 2006, 2007 and 2010)  from KPCB and JAFCO among other investors.

A former DHGate executive told a local newspaper that KPCB, one of the company’s investor for two rounds plans to discontinue its funding for the B2B service provider after years of close observation of the company with the conclusion that it’s moving too slow in making profit.

Suffering Setback In New Territory

One DHGate staff said that, one of the reasons resulted the downsizing is its setbacks in expanding into new forefront. For example, the company once tried to operate its own warehouses outside China in an aim to meet Chinese exporters’ logistics needs. However, the effort failed to fare well.

According to an Analysys International analyst, the major cause of DHGate’s awkward situation is the slow growth in exporting in general as compared to several years ago.

Listener of startups, writer on tech. Maker of things, dreamer by choice.

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