Bengaluru-based food delivery giant Swiggy announced a plan on Monday to layoff 1,100 employees and shut down non-performing business arms in an effort to reduce cost and survive as the novel coronavirus has hit its business hard.
“This is easily the hardest and longest deliberated decision the management team and I have been faced with over recent times,” Sriharsha Majety, co-founder and CEO, Swiggy, wrote in an email sent to all the employees on Monday.
In addition to the layoffs, the Naspers- and Meituan-backed company has decided to scale down or shut down businesses depending on how relevant they will be in the next 18 months.
“The biggest impact here is on the cloud kitchens business…Since the onset of Covid, we have already begun the process of scaling down our kitchen facilities temporarily or permanently, depending on their outlook and profitability profile,” Majety wrote.
According to experts and investors, ever since India went under severe lockdown on March 25 to contain the spread of COVID-19, online food orders have gone down by 70% as people have become cautious to order food from restaurants.
“While Covid might have long-term tailwinds for the delivery business and digital commerce when things settle eventually, nobody knows how long the uncertainty will last. The core food delivery business has been severely impacted and will stay impacted over the short term, but is expected to start growing again after that,” Majety said in the note.
Last week, Swiggy’s competitor, Zomato also announced it is letting go 13% of its total workforce as well as implementing pay-cuts for its remaining employees.
“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,” Deepinder Goyal, founder and CEO of Zomato wrote in a blog post.
Saved by grocery
While the demand for food delivery has nosedived in the past two months, online orders for grocery products have went up like never before. Seeing the only silver lining during these difficult times, both Zomato and Swiggy are increasing their grocery delivery capabilities.
“This offers us opportunities to continue investing our efforts in grocery and other service offerings that we think will continue to do well. We are going to invest in these high-confidence efforts to focus not on surviving alone, but on growing along the way by adapting very quickly,” Majety wrote. He further said, the company has already re-aligned some team members from other businesses into these initiatives.
While Swiggy has been delivering grocery even before the novel coronavirus started playing havoc, Zomato had to quickly ramp up and create a grocery delivery supply channel in March when online food orders started getting thinner and thinner. It has since then expanded grocery delivery into 185 cities in India and is about to launch in UAE and Lebanon as well. Moreover, it’s in talks with SoftBank-backed Grofers for a possible acquisition.
“We see long term potential in this segment. Grocery also fits perfectly into our vision of better food for more people,” Goyal wrote in his blog.