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Coronavirus Impact on Jobs: After Zomato and OYO, Swiggy Lays Off 1,100 Employees and Announces Pay Cuts

May 20, 2020 2:22 PM 3 min read
Editorial

Startups dependent on India’s so-called “gig economy” have been severely hit by the pandemic-driven-lockdown-induced disappearance of demand. And now the firing spree starts...

Food delivery platform Swiggy yesterday announced an 1,100 employee layoff - comprising nearly 14% of its workforce - “spanning across grades and functions in the cities and head office”. Ride-hailing giant Uber announced global cuts of 3,000 people, adding to its earlier tally of 3,700.

In an internal email, Swiggy’s Co-Founder and CEO Sriharsha Majety said the startup’s core food business has been ‘severely impacted’ in the wake of the pandemic.

Swiggy is reportedly delivering fewer than a million orders a day, a significant drop from the 3 million it was processing pre-COVID.

“We are choosing to scale down or shut down adjacent businesses that are either going to be highly volatile or will not be highly relevant for the next 18 months. The biggest impact here is on the cloud kitchens business, with many unknowns about volumes through the year,” said Majety.

 

Brothers in Arms?

The announcement comes shortly after food tech competitor Zomato announced its own layoffs amounting to 13% of workforce - over 520 employees, with salary cuts for the remaining employees for at least six months.

Ola let go of 300, Rivigo cut 100 employees, 1mg laid off 300, Urban Ladder retrenched 246 employees, OYO fired 1,200...

Most attempts at downsising have been positioned as targeting entry- and mid-level positions, coupled with pay cuts for senior management. Startups with large offline operations have been naturally hit harder.

India isn’t the only one. The data collated by Layoffs.fyi shows that over 436 startups across the world have laid off around 55,764 employees since March 11th.

 

Out of Cash?

Are these companies running out of cash?

We dug in the balance sheets of five notable players in the gig space: Uber (Global), Swiggy, Ola, Zomato, and Urban Clap (Now Urban Company), took their last reported current assets figure, and added the funding they’ve raised since then, to arrive at a pro forma cash number.

Agree it is not perfect and doesn’t take into account any recent burn, it is still revealing:

 

estimated current assets of gig economy leaders

 

So the question stands: Why is Uber (Global), with over $10bn in unrestricted cash, firing 6,700 people? Or Swiggy, with around $850m? 

 

Pick Your Brains

COVID-19 is a unique crisis. It is not an economic crisis, but a public health emergency with dire economic implications. It throws uncertainty at two levels: 1) reduction in demand and 2) our assumption around how consumers “should” behave. 

While point 1 is being positioned by most companies as the driver behind job cuts, it is point 2 i.e. A changing and unforeseen consumer behavior which is the elephant in the room.

Would people hail rides like before?

Would people go to restaurants?

“While this crisis has impacted our core business negatively, there is no doubt that we are now at an inflection point for the penetration of digital commerce and home delivery in India”, said Majety in the same email.

“This offers us opportunities to continue investing our efforts in grocery and other service offerings that we think will continue to do well…”, he added.

The question is how to survive and stay well-positioned to capitalise on the unknown and uncertain arrival of that inflection point?

By conserving cash.

FIN.

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