HK 'e-tailer' sacks 117 staff

By Nic Hopkins
CNN.com Writer

HONG KONG, China -- Hong Kong-based online shopping mall Dickson CyberExpress has said it will sack 117 staff members, or 50 percent of its workforce.

The company Thursday cited a lack of turnover for the move, which followed newspaper reports that it would reduce its payroll by a quarter.

Dickson CyberExpress, a division of luxury goods retailer Dickson Concepts (International) Ltd, follows a growing line of Hong Kong-based online retailers to encounter tough conditions.

Last December, media tycoon Jimmy Lai's Admart shopping network folded, leaving 334 staff out of work, as did the ChineseBooks Cyberstore, which had been modeled on U.S. books and music giants Amazon.com and barnesandnoble.com.

Many 'e-tailers' in trouble

Earlier this week U.S. online retailer eToys filed for bankruptcy protection amid a rapid downturn in U.S. consumer demand.

Shares of Dickson Concepts rose 0.94 percent to HK$2.60 on Thursday, but have lost almost 30 percent of their value in the past three months and more than twice that in the past year.

Launched last September, DicksonCyber.com is both an online shopping center with six "portals" and physical HK$350 million ($45 million) mall located in Hong Kong's Kowloon district.

But amid flagging turnover, the company has decided to write off $HK35 million ($4.5 million) and restructure the entire operation, including reducing its operating workforce from 243 to 126 employees.

The Kowloon mall would be "consolidated through cross-merchandising in three of the existing zones". New categories would be launched in the three vacated portals. As a result, the company expects to "significantly reduce its losses in the next financial year".

Analysts warn of more hardship

However, analysts warn that Dickson, and companies like it, will continue to find the environment tough for some time to come.

"Asia is a difficult market to launch an online retailing service, it's extremely fragmented -- and even in a large market like the U.S., where there is a high gross domestic product (GDP), there is no guarantee that it can work," says Merrill Lynch Internet analyst Matei Mihalca.

"In Hong Kong, GDP is not the issue, it's the sheer lack of population. It's also a cultural issue; to be successful in this market you would need to be an existing player in the bricks and mortar retail market to really succeed."

"For a new player it would be extremely difficult to recoup your costs, which makes things difficult in this environment where investors are extremely impatient for returns."

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