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After Lull, Dot-Com Layoffs Set Record in April

By Michael Mahoney
Apr 27, 2001 5:52 PM PT

After two consecutive months of declining layoffs, dot-com companies made 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).

After Lull, Dot-Com Layoffs Set Record in April

"These were surprising numbers because it looked like we had peaked, but evidently 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't reached the turning point that seemed possible in the last two months of data."

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 and the 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 breathing room there," Challenger said. "Perhaps some of the dot-coms pointed toward year-end 2000 and had done their cutting already and bought some time. But now there's another push 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-coms undergoing layoffs are gradually changing.

New Cutting Edge

"We now see more and more of these Old Economy-New Economy hybrids cutting their online staffs," Challenger said. "There were some brick-and-mortars who jumped more heavily into the online space than others. They could support investments from traditional revenue streams, but many of those companies now seem to be finding that in the online world, the payback from their investments is not sufficient."

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 standalone operations with high costs," Challenger said. "They didn't allow the technology to operate on its 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 are needed for the traditional offline companies to use e-commerce channels effectively, including a renewed focus on automated technology and low staffing costs.

"As we move into the spring and summer period, the most important factor for the dot-coms is whether they've covered their costs with their revenues, because there's going to be very little capital infusion from the outside to support future potential," he said.

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