After Lull, Dot-Com Layoffs Set Record in April

After two consecutive months of declining layoffs, dot-com companiesmade a record 17,554 job cuts in April, marking an 84 percent increase over the 9,533 e-business jobs cut in March, according to a report released Thursday by job placement firm Challenger, Gray & Christmas (CGC).

“These were surprising numbers because it looked like we had peaked, butevidently that’s not the case,” John Challenger, chief executive officer of CGC, told the E-Commerce Times. “What this report suggests is we just haven’treached the turning point that seemed possible in the last two months ofdata.”

April’s job cuts beat the previous record of 12,828, set in January. In April 2000, only 327 dot-com job cuts were announced.

In the first four months of 2001, a staggering 51,564 dot-com cuts have been recorded — more than any other four-month period since CGC started tracking layoffs in December 1999.

“The overall economy may be reaccelerating the downsizing in dot-coms andthe larger tech sector, or have pushed it to new levels,” Challenger said.

Slow and Go?

Because the overall economy has been slowing for sometime, the question is what factors caused the temporary lull in layoffs earlier this year.

“The last few months, for one reason or another, there was some breathingroom there,” Challenger said. “Perhaps some of the dot-coms pointed toward year-end 2000 andhad done their cutting already and bought some time. But now there’s anotherpush as it gets harder and harder to get another round of financing.”

The record-level cuts also came with a new caveat: the types of dot-comsundergoing layoffs are gradually changing.

New Cutting Edge

“We now see more and more of these Old Economy-New Economy hybrids cuttingtheir online staffs,” Challenger said. “There were some brick-and-mortars who jumped moreheavily into the online space than others. They could support investmentsfrom traditional revenue streams, but many of those companies now seem to befinding that in the online world, the payback from their investments is notsufficient.”

According to Challenger, many dot-coms are now realizing that it was actually “Old Economy” ways of thinking that got them into trouble in the first place.

“In terms of how they staffed these companies, many built standaloneoperations with high costs,” Challenger said. “They didn’t allow the technology to operate onits own and provide service without a lot of people supporting it.Consequently, the cost far outstripped the revenue.”

Time To Automate

In order for the layoffs to subside, Challenger said, new strategies areneeded for the traditional offline companies to use e-commerce channels effectively, including a renewed focus on automated technology and lowstaffing costs.

“As we move into the spring and summer period, the most important factor forthe dot-coms is whether they’ve covered their costs with theirrevenues, because there’s going to be very little capital infusion from theoutside to support future potential,” he said.

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