Ensogo lays off staff across the region

By Gabey Goh December 23, 2014

Sources: 60 in Malaysia, 58 in Thailand, 36 in Indonesia, 22 in Singapore laid off
Company denies figures above; management team revamped

ENSOGO, formerly known as iBuy, has moved to downsize its operations across the region with significant numbers of staff being laid off in multiple markets.

From information collated by Digital News Asia (DNA) via multiple sources, the downsizing exercise at the e-commerce company began at the start of this month with Singapore letting go of 22.

This was followed by 60 people in Malaysia being retrenched, leaving a team of about 60 behind; while in Indonesia 36 staff were let go, with the team there now at about 58 people.

Thailand was the most recently affected market, with 58 people let go from a total team size of approximately 140.

The company had a previously reported headcount of 780 in total. Sources have told DNA that all markets the company is active in have experienced staff cuts.

“Well, the indicator is that whenever [Ensogo chief executive officer] Krzysztof Marszalek travels to the particular country, people get axed,” one former employee wryly told DNA.

In response to queries by DNA, an Ensogo spokesperson denied that the number of staff laid off above was correct, but was also unable to provide an accurate figure as at press time, saying that company executives were travelling at this time.

This is the second round of layoffs in the company, with 28 people retrenched in August, mostly from LivingSocial's South-East Asian operations, which Ensogo, as iBuy, had acquired in April for US$18.5 million.

Speaking to DNA on request of anonymity, former Ensogo Malaysia employees shared that they were retrenched in a big group of 60 on Dec 4.

“We were assured to a certain extent that there won't be any more layoffs and in a way, we cannot say we saw this coming. This whole restructuring exercise was done without our knowledge.

“They just told us ‘Thank you for your contribution, but your service ends today, kindly leave the premises after obtaining your release letter and do handovers to your bosses' – and within an hour-and-a-half, all of us were out,” recounted one former employee, when asked if help with job opportunities was offered by management.

Most were given two months’ pay as severance, while those who were still under probation were given 12 days’ worth of wages.

“We were promised pay within seven days as per Malaysian labour laws, but we were only paid 13 days later,” said another former employee.

These layoffs come as Ensogo, listed on the Australian Securities Exchange (ASX), is under increasing pressure to trim its operating expenditure and cut costs.

As previously reported by DNA, country managers in Malaysia, Singapore and Thailand were asked by chief financial officer Rafael Melo to come up with ideas to cut A$50,000 each, with Indonesia and the Philippines to cut A$20,000 a month.

[A$1 = US$0.86]

The company’s financials show that the group spent close to A$10 million on wages and salaries during the first half of 2014. This is significantly higher than the amount spent by iCar and iProperty, its sister companies in the Catcha Group.

“We are very happy with the current headcount level, and are not planning any further restructuring in near future,” chief executive Marszalek told DNA in response to queries about further cuts.

“To the contrary, we have in fact made several key management appointments, significantly strengthening our team, and will continue to do so where it adds the most value to the business,” he added.

New managers

On Dec 18, Ensogo announced a slew of senior appointments: Martin Dudek as chief logistics officer; Arne Koch and Jan Hansen as country managers for Singapore and Malaysia specifically; and Liviu Nedef as its regional head of marketing.

Ensogo lays off staff across the region “We have taken a very specific view in regard to the type of people Ensogo needs to attract in order to afford us the best chance of executing on the enormous opportunity that is e-commerce in South-East Asia,” Marszalek (pic) said in a statement related to the new appointments.

“With the decades’ worth of new logistics, e-commerce and operational experience we have acquired from these key appointments, coupled with the material reductions in operating expenditure made possible by the rollout of our proprietary Ensogo Edge technology platform, we believe we are very well positioned to execute on our ambitious plans for 2015,” he added.

However, the addition of such senior talent in the wake of mass staff cuts have been met with raised eyebrows by many observers, given the need to lower costs.

“They still increased operating expenditure with these expatriate hires. If you are cutting cost, then get a local guy; Groupon is using local talents in many markets and look at where they are,” one source with knowledge of the company’s operations told DNA.

Part of the rationale behind the downsizing and restructuring is the rollout of its proprietary business process management (BPM) platform called Ensogo Edge in the fourth quarter of this year, which the company claims “has made it significantly more efficient.”

It is understood that while recent layoffs were across departments and job functions, a sizable portion of IT staff were also let go, with Singapore’s IT team almost halved.

Speaking to DNA in November, Marszalek had denied that any IT staff would be axed, stating: “We actually need more programmers. Good tech talent is so hard to find, why would we want to get rid of ours?”

The consolidation of the company’s technology assets to a single platform forms part of its turnaround strategy, and a necessary move given the fact that a series of acquisitions has resulted in six separate businesses units, each with its own individual systems and processes.

However, sources with knowledge of the matter told DNA that the consolidation has been problematic, delayed from its initial launch date in August, in what has been described as a “messy” process.

The company said it was on track to complete deployment of the system in all markets by January 2015.

In addition, cash flow has been an issue for Ensogo, with reports of payments to merchants being delayed.

Frustrations with lack of prompt payment have also resulted in a few posts on Facebook from irate merchants directing their anger at sales staff.

“Payment to merchants has been very bad, I mean really bad, some merchants could be waiting for months for their pending payment – this has caused many salespeople’s reputation to be put on the line.

“This has caused many salespeople to be too scared to meet merchants as they don't know when the company can pay them.

“We’ve got merchants coming over to the office just to demand for payment and there have been times where merchants will stop deals or stop serving customers due to payment issues,” claimed one source.

It remains to be seen if the downsizing of staff, additions to its leadership team, and consolidated technology platform will be enough to turn Ensogo around.

In a filing with ASX, the company stated that gross turnover was A$15 million and A$14.6 million for October and November respectively, while its cash position as of Oct 31 was A$6.59 million, and the cash position as of Nov 30 was A$6.93 million.

It also stated that it has initiated “cost reductions in all markets that are designed to generate positive cash flow for Ensogo in 2015.” Stock exchange filings with ASX did not reveal any announcements related to substantial shareholders disposing of any stake in Ensogo or iBuy.

The company has seen its share price dropping steadily since August, to close at A$0.078 on Dec 19, from having hit a low of A$0.077 on Dec 17 (see chart below).