Food delivery platform Zomato will layoff 520 employees, or 13% of its workforce, and temporarily cut salaries of the rest, the company’s founder said in an internal email on Friday, as the Covid-19 pandemic and resultant nationwide lockdown has hit its businesses.
Employees who are being let go will receive half their salaries along with health insurance for the next six months or till they find another job, whichever is earlier, Zomato’s founder & CEO Deepinder Goyal said in the email.
Their Employee Stock Ownership Plans (Esops), previously allocated, will however continue to vest during the period. Contract staff will be given two months’ severance pay, Goyal said.
Executives across marketing, events and content, among others, are likely to be hit the most by these layoffs, a person in the know told ET. Zomato employs nearly 4,000 people.
“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.
Read: Zomato, Swiggy see 70% drop in orders amid lockdown
Last month, rival Swiggy said it will let go staff from its private brand kitchen team, while discontinuing operations at a few other centres. At least 1,000 jobs in its private brands business were affected, sources told ET at the time.
Apart from layoffs and pay cuts, Zomato has decided to make work-from-home – fully or partially — a permanent policy. After payroll, the Gurgaon-headquartered firm’s second highest recurring expense is on real estate and it runs more than 150 offices across the world. “There’s no going back to the ‘normal’ – all we should focus on is building for the ‘new normal’,” he said.
“Covid-19 has been a black swan event for the world economy; therefore, we need to make sure that we preserve as much cash as possible to weather the storm if the business environment gets worse, or continues to be the same for the rest of the year or more…” Goyal wrote in the email to employees.
Goyal said the downsizing and reduction in salaries (as high as 50% in some cases) is aimed at preserving cash amid the uncertainty, adding that he company had enough cash reserves and had brought down monthly cash burn significantly.
Food-delivery volumes have dropped by 60-70% in the past two months compared to pre-Covid19 period, as many restaurants remain shut and consumers keep away from ordering in. ET reported earlier that industry players expect 4 out of 10 restaurants to shutter permanently due to the ongoing crisis.
“Considering what we know at this point, the idea is to make a complete shift towards being a transactions first company, focusing heavily on a small number of large market opportunities in the food value chain,” Goyal added.
Over the past few months, both Zomato and Swiggy have entered the grocery delivery space and held discussions with state governments for home delivery of alcohol.
In fact, Zomato has launched grocery delivery across 185 cities in India and plans to expand the service to Dubai and Lebanon. The company has also launched food-delivery services in Turkey and takeaways in Australia, New Zealand and Portugal.
“Contactless Dining is the need of the hour for the restaurant industry, and we have already signed up 25,000 restaurants globally,” Goyal said. ET reported on May 14 edition that Zomato was preparing to launch consumer-facing pick up and drop service, mirroring Swiggy’s Genie offering. The company is also exploring opportunities to expand logistics services to businesses outside its platform, ET reported.
Multiple internet businesses — including Oyo, Cure.fit, Udaan, BlackBuck, Treebo, Acko, Fab Hotels, Meesho, Shuttl, Capillary, Niki.ai, and Fareportal — have retrenched workers, including temporary staff, in the past few months.
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