Restaurant aggregator Zomato has laid off 540 employees from its Gurgaon head office to reduce redundancy across customer, merchant and delivery partner support teams. These employees made up 10% of Zomato’s total workforce.
The company has paid two to four-month severance pay to the employees, who were laid off. According to reports, the company said that with the improvement in technology interface, they have successfully managed to cut off customers’ service resolution needs to half from 15% to 7.5%. Therefore, a lot of positions became redundant.
The company laid off 60 employees from its customer support team last month for the same reason. It then pointed out that the company’s service quality has improved significantly in the last couple of months, reducing the need of employees in several job roles.
Post these layoffs, the company’s strength has reduced to 5K globally.
Why Zomato Layoffs?
“As we’ve expanded to over 500 cities across India we also expanded our workforce by over 2000 and this requires constant realignment to new departments and results in some redundancies with the scaling of technology,” Zomato said last month.
These layoffs seem like another step to reach profitability, especially after infinity dining launch. Infinity dining allows users to avail unlimited servings of the whole menu in listed restaurants at a fixed rate per person, according to the company blog.
Despite, earning a profit of $206 Mn in FY19, it also lost around $294 Mn in the financial year 2018-2019 due to delivery operations in India. The company’s annual report for the fiscal year 2019 claimed that it lost INR 25 per delivery. The amount was 43% less than the INR 44, it claimed to lose in March 2018.
In addition, the current tiff between restaurant partners and food aggregators might force Zomato to change its policies and cap commission, further hampering its profit.
Startup Layoffs On The Rise
The Department for Promotion of Industry and Internal Trade (DPIIT) secretary Ramesh Abhishek has previously said that over16K recognised startups have created 1.87 lakh jobs. The numbers come to an average of 11 jobs per startup.
In the first half of the year, at least 5 Indian startups have laid off several employees for various reasons. These layoffs have been attributed to reasons ranging from employees performance, lack of funding and to gain profit. Big firms like Ola’s Foodpanda, ShopClues, logistics startup Rivigo, furniture rental company UrbanLadder and Cleartrip also followed the trend.
Update: September 9, 2019 6:25 PM
The story has been updated to include the official statement from Zomato.