Retail innovators resorting to job cuts and reorganization to minimize expenses and adapt their operations
Retail Disruptors Navigating Challenging Times Amid High Inflation and Changing Trends
Several new retail companies are grappling with a tough market environment, as a combination of high inflation and evolving consumer habits have upended the patterns observed during the COVID-19 pandemic. E-commerce and tech-focused retailers are particularly struggling, with an increase in in-store shopping by some consumers.
While these brands experienced a surge in sales and online demand over the past few years, they have subsequently been brought back down to reality. As these businesses work to correct their financial standing, the retail sector is witnessing a reduction in workforce across both large and small players. Walmart, one of the largest U.S. employers, recently laid off 200 corporate employees.
Canadian e-commerce platform Shopify offers a telling illustration of the predicament many digital disruptors now face. In a letter to employees regarding recent layoffs, CEO Tobi Lutke admitted that the company bet incorrectly on the permanent growth of e-commerce. Internet-native brands are reportedly twice as likely as brick-and-mortar stores to report unprofitability, according to a survey by Ipsos for Publicis Sapient and Salesforce.
Meanwhile, funding is drying up for retail startups across the board. Global startup funding in Q2 plummeted 23% year over year, according to data from CB Insights. Retail tech funding fell 11% to $23.8 billion in the first quarter of the year, with only half as many companies going public compared to Q4 2021, as per another CB Insights report.
The current climate presents a challenging time for startups to accumulate capital and solidify their position in the market. Here's a closer look at some disruptors that have announced layoffs this year as a response to their financial woes:
- Warby Parker, known for its extensive brick-and-mortar presence within the direct-to-consumer (DTC) space, confirmed the layoff of 63 corporate employees, or 2% of its workforce. The move won't affect store or customer service employees, optical labs, or any of its store employees.
- Shopify announced layoffs impacting 10% of its workforce, citing predictions about e-commerce growth that didn't materialize as expected.
- Eyewear brand Warby Parker reported a net loss in Q2 that widened by $88.4 million compared to the previous year due to rising SG&A expenses, amid "significant volatility and uncertainty" in the global economy and consumer behavior.
- With employment numbers returning to pre-pandemic levels as reported by the U.S. Bureau of Labor Statistics, the job market is adding 528,000 jobs per month; however, updated job opening numbers show that the retail sector is slowing hiring, with job openings decreasing to 10.7 million in June, with the largest decline in retail.
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- Businesses in the retail industry are experiencing tough times due to a combination of high inflation and changing consumer habits.
- E-commerce and tech-focused retailers are particularly struggling, with an increase in in-store shopping by some consumers.
- The surge in sales and online demand experienced by these businesses over the past few years has been followed by a financial reality check.
- As a result, many retail companies are reducing their workforce, and large employers like Walmart are no exception.
- Internet-native brands are twice as likely as brick-and-mortar stores to report unprofitability.
- Funding for retail startups is drying up, with global startup funding falling 23% year over year.
- Retail tech funding fell 11% to $23.8 billion in the first quarter of the year, with fewer companies going public.
- Disruptors such as Warby Parker, Shopify, and others have announced layoffs in response to their financial woes.
- The retail sector is slowing hiring, with job openings decreasing in retail, despite the job market adding 528,000 jobs per month.
