11/11/08

Zappos.com sends a pink slip to 8% of its employees

The deteriorating economy is taking a toll on Zappos.com Inc. The online shoe retailer has laid off about 8% of its workforce to cut costs and may also close down outlet stores at its facilities in Nevada and Kentucky.

Katie Evans , Managing Editor, International Research

The deteriorating economy is taking a toll on Zappos.com Inc.

The online shoes, clothing, bags and accessories retailer, No. 27 in the Internet Retailer Top 500 Guide, is laying off about 8% of its workforce of more than 1,000 employees to cut costs. The company didn’t provide a specific number of employees that would be cut.

Zappos may also close outlet stores at its facilities in Nevada and Kentucky in another move to save money, CEO Tony Hsieh wrote in a note on the company’s blog last week. “We made the hard choice of laying off about 8% of our employees,” says Hsieh. “The layoffs will affect almost every single department at Zappos.com.”

The cost cutting comes at the urging of Sequoia Capital, one of Zappos’ biggest investors. “On Oct. 7 Sequoia held a meeting for their portfolio companies with one very clear message: Cut expenses as much as possible and get to profitability and cash flow positive as soon as possible,” says Hsieh.

The employees to be laid off will be paid through the end of the year. Workers who have been with the company for three or more years will receive an additional payout, says Zappos. Employees also will be reimbursed for up to six months of extended medical, dental and vision insurance coverage under the federal law known as COBRA, the retailer says.

In addition to reducing its head count, Zappos is also cutting back its sales forecast for 2008. Zappos now anticipates that sales will grow by about 17.7% to $1 billion from $850 million in 2007, down from an earlier sales forecast of more than $1 billion. “E-commerce growth has slowed compared to its growth rate a year ago, but the good news is that even in this tough economic environment, e-commerce overall is still growing,” says Hsieh.

Topics:

business finance, Commerce, Electronic Arts, Online shopping, Sequoia Capital

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