While taking a stand on its values might have hurt Zomato recently, its customer service overheads are causing the real pinch. Zomato has laid off 60 employees from its customer support team in Gurugram.
The report noted that Zomato spends around INR 4 – INR 5 for customer support and after-sales service for each order. A Zomato spokesperson said, “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…As we’ve expanded to 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.”
After the recent launch of infinity Dining, these layoffs seems to be another step in the food delivery company’s bid to attain profitability. In its annual report for the fiscal year 2019, Zomato had attributed major portion of its $294 Mn loss in FY19 to the delivery operations in India.
The company claimed to be losing INR 25 per delivery as of March 2019, which is 43% less than what the company was losing on each delivery (INR 44) in March 2018.
Overall, Zomato claimed to have earned $206 Mn in revenue during FY19, as compared to $68 Mn in FY18. Along with a jump in revenues, the company’s expenses also increased to $500 Mn in FY19 from $80 Mn worth of expenses in the last year.
According to RBI Economic Survey 2019, Zomato has raised $370 Mn funding in 2018, at a valuation of $2.6 Bn. Last month, Zomato has announced expansion to 500 cities, and claimed to make over 1000 food deliveries every minute. The company is said to have 1.5 lakh restaurant partners and a delivery fleet of 2.3 lakh partners.
Startup Layoffs On The Rise
Employee layoffs are on the rise in the Indian startup ecosystem. In just the first half of 2019, year at least five Indian startups had to pare down their teams and are going about their operations with fewer resources than they started the year with.
While, the companies have attributed these layoffs to multiple reasons ranging from employee performance to company’s inability to raise funds and ride on a profitable model. It is notable that for the longest time, the dried-up funding in the seed stage and in certain sectors has been attributed to lack of talent and is also one reason why startups have had to narrow down their operations and fire employees.
Other companies who have recently laid-off employees include ecommerce major ShopClues, Ola’s Foodpanda, logistics startup Rivigo, furniture rental company UrbanLadder and travel aggregator Cleartrip.