Chinese e-commerce titan Alibaba is planning for a major layoff in which key business focuses like food and grocery delivery will bear the brunt of the cuts, Chinese media outlet 36Kr reported on Thursday night.

Why it matters: Alibaba’s layoff comes after the company recorded its slowest revenue growth in 2021 since it went public on the New York exchange in 2014. The company’s financials partly reflect China’s weakened local consumption and intensified regulatory crackdown

  • Alibaba and Tencent, two of the most powerful tech giants in China, are the latest to join China’s tech job cuts which has hit nearly every major firm.
  • Like its peers, Alibaba’s primary target for the layoff is to scale back loss-making teams and downsize areas with high regulatory risks, such as online grocery and food delivery services.

Details: Alibaba is mainly shedding jobs in its location-based customer business unit, which consists of food delivery services such as Ele.me and coupon and deal service Koubei, 36Kr reported, citing unnamed sources with knowledge of the matter. Alibaba is planning layoffs that could cut more than 15% of its workforce, about 39,000 staff, Reuters reported on Wednesday.

  • Core business teams, including e-commerce teams in Taobao and related businesses, Alibaba Cloud, and Cainiao Logistics, will not be affected by the cuts.
  • Ele.me, which is facing fierce competition from Meituan, had started laying off people in January this year, the report said. The unit aims to cut between 15% to 20% of its workforce, mainly targeting positions in offline business development, regional marketing, and operation. 
  • Downsizing efforts are also happening in other local consumer services. For example, since last year, Koubei has downsized its operation to focus on first-and second-tier cities. Mapping service Amap and online travel unit Fliggy also began small-scale layoffs this year, according to the report.
  • Alibaba’s local customer service recorded an adjusted loss of RMB 5 billion ($783 million) on RMB 12 billion revenue in the quarter ended December 2021.
  • Freshippo, an online and offline grocery business that demands heavy operation, recorded a layoff of around 20% in market operation positions and may consider further salary cuts; the report cited several Freshippo employees. 
  • In addition, Alibaba’s grocery group-buy business Taocaicai is also shedding around 20% of headcount as the sector cools off.

Context: Taking notice of the gloomy economic outlook, China’s State Council sent a reassuring signal to the broader market in a Wednesday meeting, promising support for the platform economy, introducing market-friendly policies, and rolling out “predictable” regulations.

  • The profitability prospects of food delivery businesses dimmed as Beijing called for major platforms like Meituan and Ele.me to reduce fees for small businesses suffering during the ongoing coronavirus outbreaks.

Emma Lee

Emma Lee is Shanghai-based tech writer, covering startups and tech happenings in China and Asia in general. We are looking for stories related to tech and China. Reach her at lixin@technode.com.