More ecommerce layoffs: Google, Wayfair, Saks.com make job cuts

Google

The layoff news at Google was communicated in a Friday morning email to employees from Sundar Pichai, who is the CEO of both Google and Alphabet. Pichai wrote that the layoffs would cut across “Alphabet, product areas, functions, levels and regions,” but wasn’t specific about how commerce-related functions will be affected.

Pichai sounded a similar note to other leaders of the largest tech companies, referencing how the company hired quickly as tech boomed during the pandemic, and is now pulling back.

“Over the past two years we’ve seen periods of dramatic growth,” Pichai said. “To match and fuel that growth, we hired for a different economic reality than the one we face today.”

This week showed that tech layoffs aren’t relenting as 2023 begins. The news came on the same week that Amazon began a previously-announced round of reductions that will bring the total roles affected by the last several months of cutting to 18,000 roles. The layoffs are focused on the company’s commerce division, as well as people operations. Microsoft, which wants to play a bigger role in commerce but does not have as large a business as those companies, also said this week that it will lay off 10,000 employees, or 5% of the company’s workforce.

Wayfair

Wayfair said that about 1,200 of its 1,750 layoffs will affect people who hold corporate positions, amounting to 18% of that workforce. The reduction was described in a news release as an effort to “eliminate management layers and reorganize to be more agile.”

“The changes announced today strengthen our future without reducing our total addressable market, our strategic objectives, or our ability to deliver them over time,” said Wayfair CEO Niraj Shah, in a statement. “In hindsight, similar to our technology peers, we scaled our spend too quickly over the last few years.”

Wayfair said its job cuts are coming on the heels of a restructuring in August. All told, they will amount to $750 million in savings. The company is also working to realize another $650 million in non-labor-associated savings through reductions in spending on operations, advertising and capital expenditures.

Shah said that the holiday shopping period brought a positive topline performance, with order volume being a bright spot. However, the company has long struggled on the bottom line. It has racked up $980 million in losses so far this year.

GlobalData Managing Director Neil Saunders called the layoffs “a necessary step to right-size a business that has been profligate in spending but has been far less successful in delivering a return.” But he said the actions should have been taken “many years ago,” and said it will be a low-margin business even if it does reach sustainability through the cost-cutting moves.

At Wayfair, “the costs of customer acquisition, the amount of advertising required to drive sales, and the cost of servicing those sales are all incredibly high,” Saunders said. “Traditionally, this has been justified by a massive expansion in the revenue line. However, post-pandemic revenue has been in decline; and with the current state of the consumer economy, going back to the stellar growth of the past looks highly unlikely.”

Saks.com

While the layoffs at Saks.com are of a notably smaller size than those detailed above, the layoffs do underscore how challenges are affecting individual brands and retailers, as opposed to being confined to the platforms that power commerce.

It’s also a reminder of the role that venture capital played in fueling ecommerce growth over the last several years. In 2021, Saks’ ecommerce business was spun out from Saks’ brick and mortar stores by owner HBC through a $500 million investment from private equity firm Insight Partners. The ecommerce company then staffed up following the split, but is now seeking to manage costs, WWD reported.