Daraz Group, Alibaba's South Asian e-commerce arm that operates in five markets including Bangladesh, has announced that it will "bid farewell to many valued members" but stopped short of disclosing the number.

Sources at Daraz Bangladesh told The Daily Star that the layoff figure would be substantial, potentially affecting 35 percent of the current full-time staff of around 900.

"After much deliberation, we collectively arrived at the decision to adopt a more streamlined and agile structure. Reluctantly, we will bid farewell to many valued members of the Daraz family," Daraz said in a statement.

"This decision was taken as a last resort."

"Over the past couple of years, we have worked to manage costs and improve operational efficiency substantially. Despite our efforts to explore different solutions, our cost structure continues to fall short of our financial targets. Facing unprecedented challenges in the market, we must take swift action to ensure our company's long-term sustainability and continued growth."

The sources said many employees in Bangladesh are also on the list for termination.

Daraz Group organised a town hall yesterday and its CEO James Dong informed the employees about the imminent layoff, according to people who took part in the meeting virtually.

Dong took over the role of Daraz's chief executive in addition to his existing responsibilities last month after Bjarke Mikkelsen stepped down.

According to two people who are aware of the discussion regarding the layoff, some high-level executives are also being sacked.

Daraz Bangladesh also employs more than 800 people on a contractual basis, and their number might be cut significantly as well, according to the sources.

An employee of Daraz said the downsizing of the company comes as it looks to attain profitability.

Fahim Mashroor, a former president of the Bangladesh Association of Software & Information Services, described the layoff as a major setback for the e-commerce sector of Bangladesh.

"Daraz has been the market leader in e-commerce. if its leadership can't ensure profitability, it will give local and foreign investors bad signal about the market's potential."

Also, the internet entrepreneur said, a lot of young graduates who are looking to build career in the digital commerce segment will now think again.

"People who are going to lose jobs may find it difficult to get employment immediately given that the job market situation is already tight because of the recent economic slowdown."

A few other companies that depend on Daraz such as logistics service providers may also face challenges in the coming months if the e-commerce company becomes too conservative about its business growth, Mashroor added.

Chinese e-commerce giant Alibaba acquired Daraz Group in 2018. It has operations in Bangladesh, Pakistan, Nepal, Sri Lanka, and Myanmar.

Daraz is the market leader in the e-commerce segment in Bangladesh with 50,000 sellers and an average of 100,000 daily orders.

The expected layoff would be one of the biggest in the nascent e-commerce and digital service business in Bangladesh.

Earlier, Foodpanda implemented significant job cuts, while ShopUp reduced its workforce by approximately 1,000 employees.

In February last year, Daraz Bangladesh laid off dozens of employees as its parent reduced the size of the workforce by 11 percent.