The ‘tech downturn’ is starting to affect logistics companies. Chief analyst Thomas Cullen reports.
Flexport, the digital freight-forwarder and software producer based in San Francisco, has announced that it is reducing its workforce by a fifth.
In a “Note to Employees”, the two founders of the company, Dave Clark and Ryan Petersen, said that whilst they were “looking forward to what’s to come in 2023,” they had to “make hard decisions necessary to set us up for long-term success. We are overall in a good position, but are not immune to the macroeconomic downturn”. They have decided to reduce “the size of our organization and we will unfortunately say goodbye to a group of talented Flexporters….impacted employees account for approximately 20% of our global workforce.”
It is not clear what has triggered the move, whether it is the outlook for global logistics markets or the climate for financing in the technology sector. Certainly, the sentiment in what used to be called ‘Silicon Valley’ has been downbeat for several months. The giants in the sector have been shrinking their workforce considerably over the past two quarters, with Amazon just having announced 18,000 job losses. However, these redundancies were not within Amazon’s logistics function, rather they were in areas such as conventional retailing, although in the past few days the company has quietly begun to announce some warehouse closures.
Of course, one driver of consolidation is the remarkable fall-back in internet retailing volumes. However, this ought not to affect too badly companies such as Flexport, which is exposed to the wider logistics sector. A more salient issue may be the general pessimism in the finance sector about the global and the US economic trajectory. Flexport has raised billions of dollars in finance over the past few years, however sentiment amongst investors in the sector may make any future raising of investment harder. It might be suggested that this pessimism just represents a move away from the very aggressive expectations that underpinned what has been an investment bubble.
Yet this should not distract those in logistics markets to the trajectory in air freight, sea freight and other related segments that looks distinctly worrying.
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