Chinese SaaS Tech Firm Youzan Responds to Layoff Rumors

In response to recent rumors of mass internal layoffs, Youzan, a technology and software-as-a-service (SaaS) provider, disclosed to Chinese media on Tuesday that the overall layoffs rate was around 20%. Youzan CEO Ning Zhu, also know as Bai Ya, issued an internal letter to employees, opening a review of the company’s business in the past year while comprehensively introducing its future adjustment plan.

According to the letter, Youzan’s forthcoming business strategy is to take “expanding general value” and “deepening development in vertical fields” as the two cores. It plans to maintain the leading edge in “social e-commerce,” and invest more in the digitalization of the new retail industry, continuing to create value for merchants. Regarding the operation, the company aims to return to the fundamentals of business and achieve returns. In terms of organizational construction, it plans to improve the per capita output around organizational efficiency and ability.

In addition, on the evening of March 29, Youzan announced its annual results as of December 31, 2021. The financial report shows that its total revenue during the period was 1.57 billion yuan ($247 million), down 13.8% year-on-year. The annual loss was 3.29 billion yuan while the adjusted annual non-Hong Kong financial reporting standard loss was 904 million yuan, compared with 304 million yuan in the same period of 2020, while the loss increased by 197.5%.

Regarding the losses, Youzan previously explained that it was mainly caused by three major reasons. First, the business performance of the merchant service cash generation unit was not up to expectations because of the challenging and uncertain internet industry environment, together with the prolonged COVID-19 pandemic. The company expects to recognize impairment of related goodwill and assets of about 2.18 billion yuan, all of which are non-cash in nature.

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Second, in order to promote the company’s sales performance and the development of its SaaS business sector, sales expenses increased by about 23%. Although these expenses did not achieve obvious revenue effects in 2021, they promoted the future development of the company.

Last, in order to enrich and improve the company’s product portfolio, R&D expenditure increased by about 30% in 2021.

According to financial information provider Wind, since the beginning of this year, Youzan’s share price has dropped by nearly 70%.