Over the past few months, layoffs have been a prevailing trend across growth and late stages startups. Companies such as Treebo, Cars24, Rivigo, ShopClues, and foodpanda had trimmed the workforce as they shift focus towards profitability and so-called operational efficiency.
Joining the aforementioned list, Zomato has also laid off about 70-100 employees on pretext of operational efficiency. While the Gurugram-based company has denied cost-cutting measure – a reason for the layoff, a Mint report highlights it as one of the reasons behind the move.
One of Zomato’s smaller rivals foodpanda also fired about 40-50 employees in May when the company closed shutter of its food delivery marketplace unit.
“Over the last few months, our service quality has improved, and the percentage of orders requiring support have come down significantly creating a small number of redundancies for 1.2% of our workforce. Most of these redundancies are in the customer support department,” said a Zomato spokesperson through an official statement.
It’s worth noting that Zomato has been expanding at a very quick pace. Only this year, it went live in 300 plus cities. The company’s monthly volume also has grown 2 folds this year when compared to last year. Currently, it claims to do 40-45 million orders a month.
To service such expansion and growth, the company requires more workforce in customer support. That’s why the reason cited by Zomato for the layoff could be different as well.
Online food ordering space has been going through intense competition. Zomato, Swiggy, and UberEats have been bleeding profusely for a larger market share. To keep up with growth and expansion, they also require to raise staggering rounds.
Zomato has been in talks for about 4-5 months with new as well as existing investors including Ant Financials. In March, it raised $50 million from Delivery Hero, and also sold out UAE biz to make up increasing expenses. Since the company seems not very close to raising the larger round, the layoffs could be a part of the cost-cutting measure.
It’s arch-nemesis Swiggy has also been in talks with Naspers and Google for a potential $700 million round while UberEats is in the initial conversation with Amazon for selling out Indian business.
So far, over 8-10 large-scaled Indian startups had laid off over 1,100 employees in the past eight months. With two rounds of layoffs, Cars24 alone fired over 450 employees while ShopClues also fired about 300 people this year.