Chinese social e-commerce firm Xiaohongshu trims 9 per cent of staff, joining Alibaba, Tencent, others in lay-off wave

The Instagram-like platform, popular with China’s Gen-Z for finding and rating products, said it is cutting employees who failed to pass performance reviews
China’s tech industry has been beset with lay-offs after months of industry crackdowns last year, while internet platforms more carefully police online content

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Iris Dengin ShenzhenandTracy Quin Shanghai

Published: 1:30pm, 22 Apr 2022

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Xiaohongshu, an Instagram-like Chinese social e-commerce platform, said it is cutting 9 per cent of employees for subpar performance, making the Shanghai-based firm the latest to cut a significant portion of its workforce amid the country’s technology industry upheaval.

The lay-offs are “normal [personnel] optimisations as part of our performance review process, impacting less than 10 per cent of our workforce”, a Xiaohongshu spokeswoman said on Friday.

The company said that the employees who are being let go failed to pass their performance reviews, and it has started negotiations with affected staff on their severance packages. Compensation is based on the number of years served, plus one month’s salary, according to Xiaohongshu’s Chinese statement.

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Backers of Xiaohongshu, which means “little red book”, include Singapore state investor Temasek Holdings and Chinese tech giants Tencent Holdings and Alibaba Group Holding, owner of the South China Morning Post. In November, the company raised US$500 million from existing investors in a new fundraising round, after it was forced to put plans for an initial public offering on the back burner amid Beijing’s heightened scrutiny of overseas listings.

Since late last year, China’s tech industry has undergone a wave of lay-offs. TikTok owner ByteDance, its rival Kuaishou Technology, and Baidu-owned iQiyi are all among those trimming their payrolls.

Nasdaq-listed iQiyi kicked off its lay-offs in December, cutting more than 30 per cent of jobs at high-expense departments such as marketing and distribution, Chinese media Yicai and news portal Sina reported at the time.

In recent quarters, tech firms have been shifting away from a growth-at-all-costs business model, which has proven unsustainable under new regulatory oversight, to focus on reducing operational costs.

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Kuaishou said in a conference call last month that it aims to break even this year. Chen Rui, the chief executive of video streaming platform Bilibili also said last month that the company aims to “put every dollar we spend to greater use”.

Alibaba and Tencent, the country’s two most valuable tech giants, are also in the process of slashing thousands of jobs, the Post reported last month. As of the end of 2021, Alibaba had more than 250,000 employees and Tencent had just over 112,000.

Tencent president Martin Lau Chi-ping said in March the company will either streamline or exit some noncore businesses to control headcount.

Founded in 2013 by Miranda Qu and Charlwin Mao, Xiaohongshu rose quickly in popularity among Chinese netizens by merging shopping and social media. Initially designed to help travellers plan overseas shopping lists, it has evolved into a place for people to share their shopping experiences and detail the quality of products.

It is now a go-to platform for China’s Generation-Z users to find what to buy, where to visit, and even which hotels to book for quarantine.

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Since the country’s tightened regulations on internet content and data handling practices last year, Xiaohongshu has been treading carefully. It was among a handful of platforms to recently announce that it would be making user locations publicly available to crack down on rumours and fake information. Locations are derived from users’ internet protocol (IP) addresses, but profiles will only display a person’s province.

In November, Xiaohongshu was among 38 companies that China’s Ministry of Industry and Information Technology ordered to “rectify” violations related to excessive data collection and publishing misleading information.