What drove Carsome into the layoff lane?

In The Checkout this week, we explain what’s going on at Carsome and if Shopee will be able to sail through its current crisis. [Read from your browser]( The Checkout 🛒 --------------------------------------------------------------- Welcome to The Checkout! Delivered every Thursday, this free newsletter breaks down the biggest stories and trends in ecommerce. You can find past issues [here]( or [sign up here]( to receive future newsletters. Also, If you’re not a subscriber, get access by [registering here](. Written by Samreen Ahmad Journalist Hello {NAME} The struggle of tech companies in 2022 is real, and used-car marketplaces have not been spared. In 2020, many vehicle ecommerce startups in Southeast Asia and India drove their way into the unicorn club after raising large amounts of money. The Covid-19 pandemic contributed to their rise due to consumers’ fears of public transport. But fast forward to 2022, with high inflation and an economic downturn, these companies are suddenly in the slow lane. Because of thin margins and cash burn, growth has taken a backseat for now. Most of the used-car marketplaces are taking prudent measures to weather the storm. In India, SoftBank-backed [Cars24 let go of 600 employees]( earlier in May, while Droom [postponed]( its IPO plans. Recently, Malaysia’s Carsome announced that it was [laying off 10% of staff]( as well as forgoing leadership pay for the rest of 2022. The company earlier this year raised US$290 million, which supposedly put it in a better cash position than its counterparts. So what went wrong with the Malaysian unicorn? In the Big Story this week, my colleagues Putra and Emmanuel dig deeper into the financials of the company to answer that question. Speaking of cost-cutting measures, Shopee has done a lot of those lately. Last week, its retrenchment extended to Malaysia, Taiwan, and the Philippines, where it also faced an unexpected social media backlash. Our Hot Take attempts to explain when or whether we can expect an end in sight for Shopee’s string of bad news. – Samreen  --------------------------------------------------------------- THE BIG STORY [Why did Carsome lay off 10% of staff? We dig into its finances for clues]( The Malaysian unicorn says that it remains "on target" to break even in group-level EBITDA over the next few quarters.  ---------------------------------------------------------------  THE HOT TAKE  Is there an end in sight to Shopee’s current woes? Here’s what happened: - Last week, Shopee users in the Philippines stormed social media platforms like Twitter and Facebook, calling others to [uninstall and delete the app]( after the company chose controversial Filipino celebrity [Toni Gonzaga]( as its latest brand ambassador. - People questioned the timing, as Gonzaga was hired at roughly the same time that Shopee was laying off staff in the country. - Shopee’s latest rounds of cost-cutting measures also hit employees in Taiwan and Malaysia. Here’s our take: Lately, many tech companies have laid off workers. However, Shopee’s layoffs, which came market after market as opposed to one at a time, has undoubtedly lowered morale in the company. During its Q2 results, Sea announced that it would be “prioritizing profitability and cash flow management.” All these steps are being taken to achieve this goal, as the company suffered losses of nearly US$1 billion during the quarter. Still, some analysts are not expecting the company to break even in 2023. With inflation-induced cost surges - such as soaring logistics fees due to rising fuel prices - and the reduction of consumer spending in many of its key markets, growth might be hard to come by, pointed out [Jianggan Li]( founder and CEO of Momentum Works. See also: [As gas prices soar, SEA logistics players brace for impact]( However, he told *Tech in Asia* that the firm’s cash balance at the group level would be enough to sustain the company for more than three years based on its levels of cash burn for Q2 2022. According to [Ke Yan]( head of research at DZT Research, “Shopee has a window of about one year to prove to investors its ability to make profit for ecommerce." In the early days, as Shopee was expanding, Sea could use profits from its gaming arm, Garena, to subsidize losses in ecommerce. However, Garena’s profits have been in decline, with adjusted [EBITDA]( falling in each of the past four quarters. To compound matters, Sea is obliged to set aside [S$1.5 billion]( as paid-in capital for MariBank, its Singapore digital bank. It will also have to invest in MariBank and its other digital banks in the region. Sea’s ability to support Shopee is thus much more constrained than in the past. Another issue is whether the current macro environment will improve at all. “More drastic measures might be needed if the crisis lasts much longer than anticipated. But so far, the management seems to be prudent, although the communications could have been better,” added Li. As Shopee’s pandemic-led growth wanes, and as rivals Lazada and [TikTok Shop]( make their moves, Shopee’s current position as the ecommerce market leader in Southeast Asia is clearly shaking. It needs to break out of the mold. – Samreen & Simon  ---------------------------------------------------------------  NEWS YOU SHOULD KNOW Check out Tech in Asia’s coverage of the ecommerce scene [here](. 1️⃣ Naver, South Korea’s leading internet company, is [acquiring]( secondhand goods marketplace Poshmark for US$1.2 billion. Naver is also an investor in classifieds marketplace unicorn Carousell. 2️⃣ Meesho, a Meta-backed Indian ecommerce platform, has received [US$192 million]( from its US-based parent firm, Meesho Inc. 3️⃣ ShopBack has entered into a subscription agreement to raise [US$80 million]( in the second tranche of its series F round from 65 Equity Partners. 4️⃣ Cosmart, an Indonesia-based ecommerce firm, has raised [US$5 million]( in seed funding from Lightspeed, East Ventures, and Vertex Ventures Southeast Asia & India. 5️⃣ Indonesian ecommerce firm Blibli has [resubmitted]( an application to go public.  --------------------------------------------------------------- That’s it for this edition - we hope you liked it! Do also check out previous issues of the newsletter [here](. Not your cup of tea? You can unsubscribe from this newsletter by going to your “edit profile” page and choosing that option in our preference center. See you next week! [ADVERTISE]( | [SUBSCRIBE]( | [HIRE]( | [FIND JOBS]( P.S. Don't miss out on the biggest tech news and analysis. Add newsletter@techinasia.com to your address book, contacts, or safe sender list. Or simply move us into your inbox. Too many emails? Switch to a different frequency or get new content through our [preference center]( or [unsubscribe](. You can also break our hearts and remove yourself from all Tech in Asia emails over [here](  Copyright © 2022 Tech in Asia, All rights reserved. 63 Robinson Road, Singapore 068894