Food delivery majors face uncertain future as India reopens, cut jobs

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India’s food delivery start-ups such as Zomato and Swiggy are being forced to cut jobs as business struggle to stay afloat in the the aftermath of a two-month lockdown that brought the economy and orders to a complete halt, Shampa Bahadur reports.

As other small businesses and start-up cut costs due to the uncertainty of business in the months ahead, the food delivery companies don’t see business reaching pre-pandemic levels soon as restaurants remain shut and social distancing norms make it difficult to reach customers.

Zomato recently announced a reduction of workforce by 13 percent, while Swiggy decided to lay off 14 percent of its people.

“While we continue to build a more focused Zomato, we do not foresee having enough work for all our employees,” Zomato Founder and CEO Deepinder Goyal said in a blog published on the company’s website.

Swiggy’s Co-founder and CEO Sriharsha Majety wrote in an email, later also published as a blog on the company’s website, that Swiggy had been hit badly by the pandemic and the step to reduce staff was taken to “see through this winter”. 

“We also need to build a much leaner organisation and reduce costs to be able to withstand any further risks from the uncertainty. We will have to reduce our expenses so that we can achieve profitability with a smaller order volume than hitherto planned,” Majety said.

In the last few years, food delivery services had been gaining traction thanks to easy accessibility, convenience, and changing lifestyles.  While Covid -19 outbreak would intuitively seem beneficial for on-line food delivery operators as millions are staying at home, this does not seem to be the case.

Business loss is massive

Experts believe that food-delivery volumes have dropped by nearly 60% in the past two months compared to before the pandemic, as many restaurants remain shut and consumers are preferring not to order in.

This has adversely impacted the food delivery business.

“Our business has been severely affected by the COVID lockdowns. A large number of restaurants have already shut down permanently, and we know that this is just the tip of the iceberg. I expect the number of restaurants to shrink by 25-40% over the next 6-12 months. What actually happens, for better or worse, is anybody’s guess,” Goyal said.

Zomato has laid off 520 employees of its 4000 workforce, while Swiggy has let go of 1100 of its total 8000 employees in the expectation of a very uncertain future.

Those who have not been retrenched are seeing salaries being restructured.  Zomato has also proposed a temporary reduction (up to 50%) in pay for all its employees. Moreover, it is seriously considering making work from home a permanent feature for its employees.

In a bid to remain profitable over the past few months, both Zomato and Swiggy have entered the grocery delivery space and are in discussions with state governments for home delivery of alcohol.

A recent survey by the National Association of Software and Service Companies (Nasscom) to gauge the impact of COVID on start-ups showed that that 90% of start-ups were facing a decline in revenues and nearly 30-40% were temporarily halting operations or were in the process of closing down. 

Also, according to the study, nearly 70% of the start-ups have a working cash flow of less than 3 months, with early-stage and mid-stage start-ups the worst affected.

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