Ensogo fires half its team following financial woes

This week, we reported some trouble at Ensogo after merchants complained about not being wired the money paid by customers for purchases made on the site. Looking through the company’s recent financials, we now know why.

A report that the ecommerce marketplace filed on the Australian Securities Exchange (ASX) on April 29 shows it recorded A$22.6 million (US$16.7 million) in receipts from customers for the quarter ended March 31. Taking into account all the company’s costs and expenses, plus cash it had at the beginning of the year, its total cash at hand stood at only A$17.6 million (US$13 million). That means if it fails to stem its losses, and if it doesn’t raise additional money or trim costs, it could run out of cash before the year ends.

The downside is it resulted in delayed payments to merchants.

The company had to cut its team to ease cash burn. In another filing on April 29, Ensogo co-founder and CEO Kris Marszalek said the company fired more than half of its staff, bringing its headcount to under 300 from 600 at the start of the year.

The layoffs followed a bad 2015 for Ensogo, which saw losses widen to A$79.8 million (US$58.8 million) versus A$67.4 million (US$49.7 million) the previous year, according to an earlier report submitted to the ASX.

Ensogo couldn’t immediately be reached for comment.

See: Merchants angry they’re not getting payments from Ensogo

Delayed payments

The layoffs were part of a move to “centralize” the company’s operations, said Kris. He said these would reduce Ensogo’s cash burn rate by 40 percent by the second quarter of the year.

The downside, however, is that it resulted in “a slowdown in management of merchants.” Merchants, mostly from Malaysia, have complained about delayed payments from the company and its slow response to their calls and emails.

Overall, Kris insisted that all the changes happening are an offshoot of the company’s transformation into a mobile marketplace.

Ensogo launched around 2010 as a site offering daily deals, a type of online sales that Groupon had popularized but eventually fizzled out. The company was acquired by LivingSocial in 2011 and sold to iBuy Group, a flash sales site, in April 2014. From there, it operated as iBuy then later renamed itself back to Ensogo.

The company tried to make the iBuy concept work for a time, consolidating its operations and cutting its workforce in late 2014. It even managed to raise some funding in early 2015. But later that year, it began another transition – this time to a mobile marketplace.

The company said it wants to become a full-blown ecommerce company that’s focusing on product retailing. In Southeast Asia, Ensogo’s main rival is Lazada, which is now owned by China’s ecommerce giant Alibaba.