If you think that the rise in the cost of living (and more importantly, the rise in bubble tea prices) only affects you and your friends, you couldn’t be more wrong.
Just today (15 September), Sea Limited announced that the company’s top management will not be collecting any of their salaries for the time being, and that the company will also be cutting down on its expenses due to the current economy.
And if Sea Limited doesn’t sound familiar to you, a company under it will: It’s Shopee’s parent company.
Yes, the Shopee that we all know and love has a parent company.
And yes, they do more than recruit the next batch of celebrities to dance in front of orange backgrounds to Shopee tunes.
Sea, a local gaming and e-commerce company which was first established over a decade ago in 2009, circulated a message from Chief Executive Forrest Li to all staff that informed staff members of the company’s decision today (15 September).
In particular, Mr Li, a billionaire, noted that the company’s top management will not claim any of their salaries “until the company reaches self-sufficiency”.
“We can now see that this is not a quickly passing storm: These negative conditions will likely persist into the medium term,” he added.
Sea’s Losses in Recent Months
Mr Li, whose 1000-word letter was seen by Bloomberg News, wrote about the various difficulties that Sea has been facing in today’s unstable economy, where interest rates and inflation have been increasing greatly.
Over the past 11 months since October, Sea has lost around US$170 billion (approximately S$239 billion) in market value due to a worldwide dip in technology-related stocks.
Apart from that, Sea, which used to be known as Garena, has recently announced its exit in several markets, and has cut down on the number of staff in the company as well.
With regards to the decrease in investments, Mr Li mentioned, “With investors fleeing for ‘safe haven’ investments, we do not anticipate being able to raise funds in the market.”
He added that Sea’s main aim for the upcoming 12 to 18 months is for the company to “achieve positive cash flow” as quickly as it can.
Company to Reduce Travel Costs and Money Spent on Hotel Stays
And apart from the higher-ups not claiming their salaries, Sea will also be implementing other rules to reduce the amount of money spent by employees when travelling for work.
Sea will now only book economy class flights for travel purposes and keep employees’ travel meal expenses to US$30 (approximately S$42.18) each day.
In addition to that, hotel rooms booked by the company will also cost US$150 (approximately S$210.91) or less per night.
The company will also do away with reimbursement for meals and entertainment from hotels, which it used to offer.
“The only way for us to free ourselves from relying on external capital is to become self-sufficient, generating enough cash for all our own needs and projects,” Mr Li explained.
Other Difficulties Faced by Sea
With interest rates and the cost of living increasing by the day, there is no doubt that Sea has been affected in other aspects of its business as well.
In particular, Sea has suffered losses as consumers have generally been spending less on online shopping on its platforms such as Shopee, even if it may not feel like it for some of us who are still happily adding dozens of items to our shopping carts every day.
On the other hand, Garena, which currently functions as Sea’s digital entertainment and gaming arm, had its most popular game, Free Fire, banned in India.
Previously, Free Fire accumulated more than 80 million daily active users based on information obtained in May 2020.
With regards to that, Sea announced that Garena is expected to “post its first decline in bookings this year”, and the company decided to withdraw its e-commerce forecast for this year just last month as well.
Other Markets that Sea and Its Companies Have Exited Lately
And that’s not all.
Just a week ago, Shopee announced its departure from the Argentinian market.
Furthermore, the e-commerce arm of Sea will be ceasing most of its operations in Latin American countries such as Chile, Colombia and Mexico. This is so that the company can place more emphasis on profitability rather than growth for now.
Based on an individual who allegedly has information regarding this issue, Shopee will only have a “small local presence” in these three countries after it shuts down its offices, with the purpose of these small-scale operations being to “support regional markets”.
According to this person, who was not identified but was verified by Bloomberg, Shopee pulling out of these markets will result in the loss of “a few hundred jobs”.
As for what Shopee has to say, its Chief Executive Officer (CEO) Chris Feng said that the company’s decision is due to “elevated macro uncertainty”.
“This means focusing our resources on our core operations,” he clarified through an internal e-mail.
Prior to this decision, Shopee also chose to exit the markets in France, Spain and India just months after it began operating in these countries.
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