DETROIT – StockX is cutting staff as economic slowdowns begin to hit tech companies.
The multibillion-dollar Detroit-based sneaker and streetwear online marketplace confirmed this week 8% of its total workforce was laid off. StockX did not say how many people were impacted, but the company website says there are more than 1,500 employees, which means an estimated 120 people lost their jobs.
“The macroeconomic challenges currently impacting our global continue economy to affect consumer behavior, and hit businesses of all shapes and sizes. StockX is not immune to these challenges, and while our business continues to grow, the current climate calls for us to make adjustments. As a result, we made the difficult but prudent decision to reduce our workforce.” a statement said.
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StockX said affected staff received severance packages and temporary health benefits after being laid off.
Other tech companies have been slimming their staffs in recent weeks as the hot US economy starts to cool.
A tally from Crunchbase estimates 22,000 US tech workers have been impacted by mass layoffs in recent months.
Netflix has reportedly terminated 450 people across two rounds of layoffs. Carvana, an online auto retailer, lost about 12% of its workforce, or 2,500 people, to job cuts, the Associated Press reported. And cryptocurrency platform Coinbase laid off 1,100 people with CEO Brian Armstrong citing an economic downtown and the need to manage costs after growing too quickly.
“As we operate in this highly uncertain period in the world, we want to ensure we can successfully navigate a prolonged downturn. Our team has grown very quickly (>4x in the past 18 months) and our employee costs are too high to effectively manage this uncertain market,” Armstrong wrote in a June 14 blog post.
While layoffs can be a troubling sign of an impending recession, Grand Valley State University economist Paul Isely says these job losses are mostly specific to the tech sector.
“Their business model was working excellent during the pandemic,” he said. “And now that we’re coming out of the pandemic, people aren’t using those services as much because they have other ways to access them.”
For example, demand for Peloton exercise bikes surged during the COVID-19 pandemic when lockdowns shuttered gyms. But now that restrictions have eased, declining sales prompted Peloton to pause production earlier this year.
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Another blow to tech companies is rising interest rates.
In order to tamp down an 8.6% increase in prices, the Federal Reserve has cranked up interest rates twice this year.
“That’s affected particularly the tech sector,” Isely said. “Because for the tech sector, their valuations and access to capital had a lot to do with their expected growth. As interest goes up, it makes it harder to do that growth, and those expectations for growth have started to drop.”
For StockX, it was a double blow.
The tech industry took a hit due to interest rates while people started buying less; 79% of consumers are bracing for bad economic times, the University of Michigan Survey of Consumers shows.
“Parting with team members is never easy, particularly when those team members are people who are passionate about their work and committed to delivering on our brand promise each and every day. However, effectively navigating today’s reality requires investment in long-term sustainability,” StockX said in its statement.
As the Fed attempts to achieve a “soft landing” to address inflation, economists are keeping a close eye on barometers like prices and unemployment.
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There are concerns the US could sink into stagflation — an unusual economy first seen in the 1970s where both inflation and unemployment are high. A recession, with high unemployment and a weak economy, also remains a possibility, but Isely said it will look different from the high 2008 downturn.
“This slowdown isn’t going to be the same broad-based destruction that we saw with the Great Recession,” he said. “It does mean that some sectors should be more worried and we might see some pullback in places that are particularly interest rate sensitive.”
For now, the labor market remains tight in most sectors.
But Isely cautioned industries that are more vulnerable to interest rate increases, like tech and finance, could see some volatility in coming months.
“There’s still enough need in the labor market to pick up staff as people are laid off in these particular sectors,” he said. “But as we head into the fall, we’ll be watching very carefully because the risk of it becoming slow enough that’s not the case comes into play.”
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