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Indian food delivery unicorns clubbed by own government

Swiggy and Zomato let go of hundreds of workers in face of lockdown damage.

A Swiggy delivery person's two-wheeler parked in Bengaluru. Photo by Avanish Tiwary

India’s stringent coronavirus lockdown has rebounded badly on the country’s food delivery sector, forcing two of the biggest players to cut jobs as rivals around the world enjoy bumper growth.

Zomato, backed by China’s payment giant Ant Financial Services Group, a sister company of e-commerce giant Alibaba Group Holding, announced on May 15 that it would let go of up to 13% of its workforce, about 520 workers.

Swiggy, backed by South African internet conglomerate Naspers and its long-time ally Tencent Holdings of China, announced three days later that it would “part ways” with 1,100 workers.

The setbacks contrast with the rise in demand across much of the world experiencing various forms of lockdowns. In Tokyo, Japan’s top two meal carriers —LINE-owned Demae-can and Uber Eats, a division of Uber Technologies of the US— experienced a 60% increase in daily orders after Prime Minister Shinzo Abe on April 7 declared a state of emergency in seven prefectures.

In the US, consumer spending on delivered food in the last week of March was up 70% from a year earlier. And in Indonesia, the food delivery division of ride-hailing unicorn Gojek in early May experienced double-digit growth in daily usage from a year earlier.

Demand in India in theory also should have increased after the government imposed a stringent lockdown on all 1.3 billion Indians on March 25. Instead, food delivery companies have suggested the manner in which the lockdown was imposed and enforced has confused customers and hampered restaurants.

“A large number of restaurants have already shut down permanently. … I expect the number of restaurants to shrink by 25-40% over the next 6-12 months,” said Deepinder Goyal, Zomato founder and chief executive, in his letter to employees announcing the layoffs.

A manager at Swiggy told Nikkei Asian Review that demand had also dropped. “Some people stopped ordering delivery out of fear of infection,” the manager said.

Prime Minister Narendra Modi gave citizens only a four-hour notice when he declared at 8 p.m. on March 24 that a national lockdown would begin at midnight. It took citizens, law enforcement officers, and bureaucrats off guard.

Although Modi and other ministers declared food to be essential and exempt from lockdown restrictions, many law enforcement officials were not sure whether the exemption covered deliveries.

As a result, many delivery agents on their motorcycles were stopped by police at road checkpoints and accused of violating the curfew. Some TV news reports aired video of police destroying riders’ scooters with long, heavy sticks they use as clubs. Many delivery agents abandoned their jobs out of fear.

Restaurants also faced staff shortages as many employees were unable to commute because of the brutally enforced curfew. The lockdown also banned using auto-rickshaws and buses, essential means of transportation in India.

The number of available restaurants listed on the Swiggy and Zomato apps gradually decreased as the lockdown proceeded.

Delivery trucks and warehouses operated by Amazon, Flipkart, Big Basket, and Grofers also faced zealous enforcement of restrictions. Company representatives pleaded with the central government to make sure police officials on the ground understood that food —whether being stored in a warehouse, transported on trucks or delivered by boys on motorbikes— was exempt from lockdown.

The situation on the road ameliorated after a couple of weeks, but, as Goyal noted, the number of available restaurants has not come back.

This article first appeared on Nikkei Asian Review. It’s republished here as part of 36Kr’s ongoing partnership with Nikkei. 36Kr is KrASIA’s parent company.