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JD.ID layoffs reflect struggles in Indonesian start-up industry

Jakarta Globe - December 14, 2022

Faisal Maliki Baskoro, Thresa Sandra Desfika, Jakarta – The latest round of layoffs has hit the Indonesian startup industry with JD.ID, the local arm of Chinese JD.com, confirmed that around 30 percent of its employees, or 200 people, have been let go, the company said on Tuesday.

The company cited global challenges and intense competition in the e-commerce sector as reasons to streamline its operations. This follows a trend of layoffs at Indonesian startups over the past year, including Sayurbox, Ruangguru, Ajaib, and Shopee.

"In response to the rapidly changing business landscape, we have taken steps to streamline the company so that we can continue to adapt and move forward," Setya Yudha Indraswara, JD.ID's head of corporate communications and public affairs, said in a statement.

Setya cited global challenges such as rising interest rates, geopolitical instability in Ukraine and Russia, and intense competition in the e-commerce sector as reasons for the need to cut costs and adapt. Despite the layoffs, Setya assured that JD.ID remains focused on improving its business model and cash flow to achieve positive margins and ensure its employees receive the support they need.

"JD.ID remains committed to supporting the 30 percent of our employees impacted by the layoffs. This includes continuing to provide insurance benefits and support for talent promotion," said Setya.

Over the past year, many startups in Indonesia have had to lay off employees. JD.ID's e-commerce rival Shopee fired 3 percent of its employee in Indonesia as part of its parent group's effort to streamline operations worldwide.

Sayurbox, an online grocery startup backed by Northstar and Alpha JWC Ventures, also cut off 5 percent of its workforce last week.

Commenting on the trend, Melisa Irene of East Ventures said that more and more startups are now thinking about the sustainability of their businesses.

"In the past, companies were only judged based on their GMV [gross merchandise value], but now we're seeing more focus on revenue and profitability," said Melisa.

Earlier, AC Ventures' founding partner Pandu Sjahrir identified three critical factors behind startup mass layoffs in Indonesia. The first factor is external, such as rising interest rates, inflation, and the Russia-Ukraine war.

The second factor is the high expectations of investors who have seen the rapid business cycle of technology companies during the Covid-19 pandemic have yet to be met by the startups' financial performance.

The third factor is startups' burning money strategy to gain a significant market share in recent years might have come to an end.

"Many companies are now refocusing on their business and reducing burning costs, in marketing costs or business processing costs, all significantly reduced," Pandu said.

He added that the recent layoffs would continue until next year, but it would also change the shape of startups.

Pandu said the layoffs had taught companies to return to their focus on profit rather than chasing a significant market share. "I am optimistic for 2023 because there will be a lot of reshaping of the industry. There may be mergers, consolidations, and the winners will be the ultimate winners 5-10 years from now," he concluded.

Source: https://jakartaglobe.id/business/jdid-layoffs-reflect-struggles-in-indonesian-startup-industr