Foodpanda's job cuts signal increasing impact of automation

In the past few weeks, food-tech company foodpanda eliminated 15 per cent of its workforce - that translates to between 250 and 300 employees. By its own admission, it is aiming "towards profitability in India". That implies a stricter control on expenses as well as productivity drives. In fact, a press release from the company does link the job cuts to automation, a favourite tool for companies wanting to do more with less.

"foodpanda has innovated strongly on the technology side and has been introducing several solutions for better management of food discovery, order processing and for making the delivery experience better," the release stated. "foodpanda's restaurant management application allows order automation, synchronisation of opening hours as well as menu item configuration. Combined with stronger processes and controls to make operations more efficient, foodpanda has managed to reduce manual intervention and achieved about 98 per cent automation rate in order processing. foodpanda has therefore reduced the overall work force by about 15 per cent."

That link between automation and job loss, between the machine eliminating the need for men, strikes at the heart of many projections - those that say that the e-commerce sector will be a huge employment generator in India. Depending on the survey you refer to, the sector is pegged to rocket from about $14 billion now to about $80-100 billion by 2020. Some reports in the media say, "It's raining jobs" - the next three years could employ 150,000. That is not going to happen if automation takes hold.

The e-commerce sector, by its very nature, is already very technology savvy. Thousands of software are easily available at basic prices to streamline the logistics function, for instance. Marketing, order processing and tracking are other areas where automation is playing a role; that role will see a step-up in the months ahead. Robotics will eliminate the need for manual labour in large warehouses the sector maintains. An executive who is evaluating robots for his warehouse told this writer that currently it may not make sense: robots are more expensive than people, by as much as six times on certain occasions. But what happens when the price of hardware (as also software) falls and its processing capacities jump?

Manufacturing is one sector that is already feeling the heat of automation on jobs. Multinational and Indian companies have been investing in 'smart' factories that combine automation, new processes, industrial Internet and Big Data. Today, 'greenfield' factories - brand new plants - employ very few people. Can e-commerce be far away?

foodpanda's drive for profitability also signals changing investor goals. The food-tech sector is seeing a churn. All of a sudden, one of the hottest sectors of 2015, where marquee investors such as Temasek, Vy Capital, Sequoia Capital, Accel India, DST Global, Matrix Partners and Kalaari Capital, among others, poured in $177 million till October-end, appears to be cooling.

Too many start-ups have burnt venture money way too fast, and are struggling to raise funds any further. TinyOwl, a food-tech start-up, operated in six cities: Mumbai, Bangalore, Delhi NCR, Chennai, Hyderabad and Pune. But the company decided to scale back operations in four of these cities. Bangalore-based food tech company Dazo shut operations recently. SpoonJoy, another Bangalore start-up, merged into hyper-local grocery and fresh food delivery company Grofers. Zomato, the only unicorn in the Indian food-tech world, recently fired 300 employees, shut down its cashless business in Dubai, and restructured its markets. Investors have started demanding better unit economics from companies going all out to get more app downloads.

All this may tilt the scales in favour of the machine. Man could lose.