China Business News, 9/27/11
Chinese B2B e-commerce firm DHGate has begun massive layoffs due to lack of funds, according to a former employee, including 60% of its B2B platform department, and 50% of its technology and marketing personnel. The cuts will also affect senior management.
Kleiner Perkins Caufield & Byers (KPCB), which led US investors in two rounds of funding in DHGate, has determined the company is not increasing profits rapidly enough and decided not to provide any additional funding, according to the source.
While multiple sources within the company confirmed that there were personnel changes in early September, they said the layoffs had been completed. Employees stated that cuts were nowhere near as high as rumored, and that approximately 20% of the staff had been cut, leaving approximately 500 employees in the company's Beijing headquarters and another 200-300 in other offices. The cuts were made across various departments and in both Beijing and local offices, according to the source, with personnel changes affecting up to 50% of relatively small departments, but this includes both terminations and transfers. Terminated employees will receive "n+1" compensation packages before the end of the month.
Another reason for the cutbacks, according to a DHGate employee, is because the company suffered setbacks in some of its newer initiatives. For example, DHGate had planned to build an overseas warehouse to meet the logistical needs of both domestic and overseas SMEs and formed a team of less than 10 people, but the project proved unsuccessful.
Many industry analysts attribute the layoffs to the slow growth of overseas trade. A regional manager for DHGate in the Yangtze River Delta area reportedly told another industry insider that overseas trade has been significantly lower than the past two years.
Editor's Note: For more information on this topic, please see "Rumor: DHGate Reduces Workforce," MD 9/09/11 issue. A spokesperson for DHGate contacted Marbridge the day after the news summary above was posted and denied that Kleiner Perkins Caufield & Byers (KPCB), had determined not to provide any additional funding to DHGate. In a separate statement, KPCB has also denied the rumor that it had determined not to provide any additional funding to DHGate. In addition, China Business News, as of September 28, had revised its original report on DHGate, expunging the paragraph pertaining to KPCB.