Economic Hardships Take a Toll on Iranian Startups

EghtesadOnline: Major Iranian online marketplace Bamilo announced Wednesday that the firm has been forced to cut jobs and downsize due to economic hardships and falling revenues.

News ID: ۷۴۶۷۴۸

23 February 2019

In a statement published on Bamilo’s Twitter account, the online market place said it has been forced to shut down some sections responsible for selling goods ales no longer in demand.

The statement further adds that henceforth Bamilo will focus on selling Fast-Moving Consumer Goods (FMCG). FMCGs, also called Consumer Packaged Goods (CPG), are products that are sold quickly and at a relatively low cost. Examples include non-durable goods such as packaged foods, beverages, toiletries, over-the-counter drugs, and other consumables.

Bamilo used to offer a wide range of products from smartphones to home appliances. However, after the US imposed new sanctions last year and purchasing power of the people took a drubbing, demand for handsets and high-end home electronics plummeted, according to Financial Tribune.

This is not the first time that an Iranian startup is forced to lay off staff and downsize due to economic problems. Last September leading Iranian online retailer Digikala cut 175 jobs for the same reasons cited by Bamilo.

At the time, Digikala published a statement enumerating three main causes for its decision to cut staff. “The public’s purchasing power has dwindled and has had an impact on sales of certain products.”

The second reason it said was the disruption in the supply chain arising from bans and tough restrictions on imports.

Ineffective and impulsive economic policies adopted by the government hamper imports leading to widespread chaos and instability in the market, was the third and final reason that forced the once-thriving company to downsize.

Pronounced Impact

The impact of the limping economy obviously has not been limited to online retail. In a talk with Financial Tribune, Secretary of Tehran Guild Association of Online Businesses, Shayan Shalileh said the US sanctions, plus economic headwinds are taking a toll on all Iranian startups, predicting that many firms may be on their way out or be forced to shorten their payrolls.

Admitting that the economy is struggling due to the US restrictions, Shalileh said, “Purchasing power of the people has taken a hit and households are cutting spending. By extension revenues of many startups have also plummeted.”

As of early January 15 startups had gone bankrupt since US President Donald Trump abandoned the Iran nuclear deal in May and re-sanctioned Tehran.

Soon after, the national currency lost some 70% of its value. With every passing day, the economy shrinks and prices hit new highs. The worsening economic conditions have affected most businesses including startups and e-commerce firms that had thrived over the past few years.