Bengaluru-based fashion retailer Voonik has reportedly asked 200 employees out of its workforce of 350 to forgo their salaries for the next three months. According to sources close to the development, the move is part of the company’s efforts to cut costs amidst increasing competition from the likes of Myntra, Jabong, Amazon and Limeroad.
In response to an email query sent by Inc42, Voonik co-founder and CEO Sujayath Ali dismissed these reports, stating, “This is incorrect information and we deny it. In an all-hands meeting, I had asked team members to be ready for an uncertainty in the worst case event of the salary payments being delayed. We have full intent of paying the salaries on time. It was an exercise of preparing the team to be ready for self-sustenance from operational cash flow instead of continuing to spend from investor money.”
As per some media reports, the speculated cost-cutting measure will affect the fashion retailer’s product development and customer support teams. Salaries of Voonik’s operations team, however, will not be deferred for the time being, sources revealed.
In a meeting that took place yesterday, Ali further stated that employees who were planning to resign will get one month’s salary. The development comes after Sequoia Capital-backed company’s cash burn skyrocketed last year, following increased spending on hiring, marketing and advertising.
Adding to the problem is the fact that the fashion retailer has failed to raise fresh funding, after it secured $20 Mn in a Series B round led by Sequoia, Beenos and others in June 2016.
In a recent interaction with ET, Ali said, “Voonik is currently one or two months away from EBITDA profitability. One of the measures is restructuring certain teams. As part of this exercise, we have requested these team members to self-select to being part of our last leg of the journey towards profitability, which includes deference of salary if required. We have done this exercise in the past as well and we have always paid back the deferred salary.”