Tech Firms Keep Laying Off Workers. Is Fashion Next?

Big Tech has already laid off globally over 100,000 employees this year, according to, with Chinese media giant Tencent and buy-now-pay-later company Affirm among the latest to cut staff.

Fears that cuts at Microsoft and Amazon would lead to job losses in the wider economy have so far proven unfounded. Despite warnings signs that the economy is headed for a period of slow growth, or even recession, the US unemployment rate fell to 3.4 percent in January, a 53-year low.

Still, fashion hasn’t been entirely immune from the need to cut costs. Neiman Marcus, PVH, VF Corp., Everlane and H&M are just some of the retailers that announced layoffs in recent months. Many cited economic uncertainty as the primary reason to reduce headcount, as consumer spending began to cool in the second half of 2022 (though US retail sales unexpectedly spiked in January).

Retailers dependent on online sales have it worse, as they’re also compensating for the post-pandemic pullback in online shopping. Canadian e-tailer Ssense, for instance, laid off 138 employees or 7 percent of its total headcount last month, while The RealReal said it would eliminate 230 jobs last week, or also about 7 percent of its workforce.

For fashion companies bracing for a year of stagnation or declining sales, eliminating non-essential corporate salaries and closing underperforming stores are relatively easy levers to pull.

“A lot of brands and retailers are expecting 2023 to be a very muted year in terms of growth,” said Neil Saunders, managing director at GlobalData, a consultancy. “When people are predicting declines, it’s all about cutting costs to match the [muted] demand.”

Course Correcting

For some e-commerce companies that have eliminated jobs in recent months, it was a matter of correcting for an aggressive hiring spree in 2021, when tech valuations and growth expectations were at a high.

Last July, Shopify announced it would cut 10 percent of its workforce, or 1,000 employees. Chief executive Tobias Lütke said in a memo at the time that he had made the wrong call to expand the platform in 2020 in response to what turned out to be a temporary spike in online shopping activity.

For others, the layoffs are a necessary step to protect profits at a time when sales are slow.

The initial signs of a slowdown appeared last summer, when the post-pandemic growth streak — fuelled by pent-up demand, high savings, and glee for the world opening back up again — began to run out of steam. Second-quarter sales for companies like PVH and VF Corp. dropped year-over-year, a decline that carried over into the holiday season for many brands.

Across the board, retailers lowered their 2023 forecasts as they confront not only dwindling consumer confidence but an increase in the cost of operations, including raw materials and shipping. They also had to discount more products to reduce an inventory overhang, hurting margins.

“With cost pressures increasing and weakened demand, the bottom line will come under a lot of pressure, and a lot of retailers are trying to avoid that,” Saunders said.

Barring an economic miracle, more layoffs are likely coming. Public companies face pressure from shareholders to keep costs down. Big, established retailers can attract activist investors who will push for even deeper cuts, while start-ups that have seen their post-IPO share prices plunge are scrambling to move up their timetable for reaching profitability.

“In a lot of cases, layoffs really were the right decision,” he added. “During the boom of 2021, a lot of retailers were quite gung-ho about recruitment and they based that on forward predictions of strong demand that’s now petering away.”



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Compiled by Diana Pearl.

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