Hong Kong-based food delivery start-up Plum to cut entire staff in attempt to restructure
- The company, established in November 2017, says it will provide equity ownership to staff who wish to stay on
- It follows announcement on Monday by clothing retailer Esprit Holdings it was cutting 40 per cent of office staff and closing shops globally
Food delivery start-up Plum has laid off its entire staff, becoming the second company to roll out a redundancy plan in 24 hours. It did however offer workers the option to stay on as co-owners.
Desmond Clinton Cheung, co-founder and general manager at the company revealed on Tuesday that full-time contracts for all 110 workers, including his own, had been terminated, and the company’s new structure would provide equity ownership to staff who are interested in continuing to work at the firm.
Cheung said the company had contacted all staff internally starting from Monday to see whether they wanted to join the new structure and he hoped it could finalise the number of staff staying in the next few days.
“In the past, they were salaried staff and they would become shareholders,” he said.
The Hong Kong-listed company recorded a net loss of HK$2.5 billion (US$319.5 million) for the year ended June 2018, compared with a net profit of HK$67 million the previous year amid declining customer traffic and increased competition from e-commerce channels, according to its annual report.
Plum was founded in Hong Kong in November 2017. According to its profile on the social media site LinkedIn, it had more than 200 employees and also operated in Singapore, while its website said it had more than 800 restaurant partners locally.
Cheung said the company wanted to rightsize the organisation and set up the business model on a more sustainable path.
“Our growth rate might have been a bit fast,” he said.
The co-founder said the company had laid off about 40 workers a few months ago to control costs and to see if it could optimise its cost structure.
But after a recent review, the new business model was considered to be the most suitable one to sustain the business, Cheung added.
He admitted the move would “without a doubt” create instability for workers at the end of the year and the decision was made after rounds of consideration.
“Again, ultimately, we think that if the company needs to survive and continue providing business as usual, the timing is not something we can control so much,” he said.
“The whole structure aimed to provide an opportunity to all affected workers to continue working here.”
He hoped workers could recognise it was a positive option but he understood they might see it differently.
Economist Andy Kwan Cheuk-chiu, director of the ACE Centre for Business and Economic Research said the news of the lay-offs did not mean that Hong Kong’s economy had performed poorly and he did not foresee big redundancy plans in the retail sector.
Esprit had not been doing well in recent years and the brand name had seemed to decline in popularity, Kwan said, and the structural change within the food delivery firm could be just for better cost control and to boost motivation among workers.
He said these were individual cases and that the retail industry could see single-digit growth next year.
He believed the pressure on the city’s economy could be felt more in the second quarter in 2019 due to the effects of the US-China trade war.
“It would depend whether the unemployment rate rises. If it does, then consumer sentiment will be affected most, which in turn causes impacts on retail,” he said.