Netease restructures amid slowing e-commerce growth

Chinese internet and gaming giant Netease is slashing up to 50% of headcount from several business units, including e-commerce arm Yanxuan and its Hangzhou-based educational product unit, as it focuses on core businesses and boosting returns.

The layoffs began in January, and is ongoing. Yanxuan will trim 40% of staff and Weiyang, NetEase’s pig farm business, will reduce employees by 50%, said an unnamed employee to Chinese media. The educational product unit, which runs Netease’s open online education platform, Icourse163, will downsize a third of its employees, and public relations lost more than 40% of its staff.

A company spokesperson told TechNode on Thursday that Netease is reorganizing to regain its core business focus and better leverage competitive strengths moving forward.

The layoffs appear to have been timed abruptly, with some employees being fired soon after being hired or promoted, according to Chinese media reports. The downsizing follows a round of restructuring earlier this year, as Netease recalibrates its e-commerce and gaming businesses.

Netease reported net revenues of nearly RMB 20 billion (around $3 billion) in the fourth quarter of 2018, with more than half coming from online game services and a third from its e-commerce sites Kaola and Yanxuan. However, e-commerce growth in the period ended Dec. 31 continued a downward trend, decelerating to 43.5% year-over-year from 67% in the third quarter and 75% in the second quarter. Gross profit margin also dropped to 4.5% from 10% a year earlier.