New Low for Dot-Com Workers

For the sixth month in a row, dot-com layoffs have reached record numbers, according to a report released Monday by outplacement firm Challenger, Gray & Christmas (CGC).

The Chicago, Illinois-based firm said that during the month of November, 8,789 dot-com employees lost their jobs — an increase of 55 percent over October’s layoff toll of 5,677 and 28 percent of total layoffs since CGC began tracking the disappearance of dot-com jobs last December.

According to CGC chief executive officer John Challenger,the current holiday shopping season will make or break the dot-com sector, but the early returns are positive. Challenger added that the numbers show that more and more people are turning to the “e-commerce world to buy goods and services.”

Losses To Continue

Challenger told the E-Commerce Times that he expects the bloodletting to continue, with more dot-com closures and layoffs to be announced in December and January. However, he hopes that a profitable holiday season will be enough to stop the flow of dot-com blood in the spring.

During November, several major e-tailers, including Amazon-backed Pets.com, MotherNature.com and Furniture.com, shut down. Additionally, online content provider TheStreet.com cut 111 jobs, and online advertising company 24/7 announced it was laying off 200 employees.

Services Firms Lead Losses

Since CGC began tracking dot-com layoffs, 383 companies have eliminated a total of 31,056 employees. Additionally, 75 of the companies, or almost 20 percent, have shuttered their virtual doors for good.

Most of the layoffs — 12,551, or 40 percent of the total cuts — have come from firms providing online services, including financial, consulting and information.

Challenger attributed the high percentage of layoffs in the services sector to the fact that the sector grew as if it were “on steroids,” and growth in the sector outpaced demand because “people haven’t changed their habits” as quickly as the dot-coms expected. This dynamic led to an “oversupply” of such companies.

The online retail sector suffered the second-largest number of job cuts since last December with 7,863, or about 25 percent of the total.

Reasons for Crash

In addition to an oversupply of dot-coms in certain sectors, Challenger attributes the current state of the dot-com world to the Nasdaq plummeting in March and May, and to the addition of seven new Internet suffixes.

“Many companies are running on fumes when it comes to cash,”Challenger said, adding that “prospects for a pre-New Year IPO are slim.”

Meanwhile, he noted,”Dot-coms that relied heavily on their names to build traffic that attracted advertisers and investors saw their Web address exclusivity disappear” with the addition of the seven new suffixes.

This month, the Internet Corporation for Assigned Names and Numbers (ICANN) voted to add dot-info, dot-biz, dot-name, dot-pro, dot-museum, dot-coop and dot-aero to the list of available Web suffixes.

Employment Prospects

Even as record numbers of dot-com employees are losing their jobs, Challenger said he believes that at least some of them have been “bitten by the bug” and will stay in the e-commerce sector instead of moving to more traditional companies.

He also sees some applying their e-commerce knowledge to new jobs with more traditional companies that are beginning to venture into the e-commerce world.