Coronavirus impact: Swiggy lays off 1,100 employees, future of cloud kitchens uncertain

KEY HIGHLIGHTS

• Swiggy lays off 1100 employees, could lay off more
• Scaling down of cloud kitchen business imminent
• Focus on grocery delivery and other services to get importance

After Zomato cut to its workforce by 13 per cent, Bengaluru-based online food and delivery platform Swiggy has now said that it will lay off 1,100 employees from the company.

In an email sent out to its employees, the company's CEO Sriharsha Majety said that the company has to go through an unfortunate downsizing exercise owing to the challenges that pandemic has brought forth. "COVID hit us with another huge blow of uncertainty, forcing us to look even harder at our cost base and preparedness for the road ahead. 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," said Majety in the mail. 

Also read: Zomato fires 13% employees, announces 50% salary cuts due to coronavirus

While the company had already begun to chalk out its profitability road map a few months ago to better its unit economics, it also mentioned in its mail that the move could result in cost rationalisation including reduction of headcount. "While all our hard work and some good luck has meant that we have had a stable setup all these years, we have to make some very hard decisions today," said Majety. Apart from reduction in headcount the company would also look at other cost levers such as spends on hubs, office infrastructure and additional reductions in teams and initiatives that have been hit by the coronavirus crisis.

Also read: Coronavirus lockdown: Amazon India tweaks operations playbook for safety of employees, customers

Most importantly Swiggy would also look at the viability of its cloud kitchen business. Since the onset of coronavirus the company had already started the process of shutting down cloud kitchen facilities temporarily or permanently depending on its viability. "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 kitchen business, with many unknowns about volumes through the year," he said. Though the core business of food delivery has been affected, going forward the company hopes to bet big on the grocery and other service offerings. Swiggy has also re-aligned its teams to concentrate on the new initiatives.

The company which recently raised over $100 million also said, "While we are very fortunate to have raised capital just before COVID hit and have sufficient runway today, it is incredibly important to prepare for worse scenarios in the macro environment and make sure we are protected."

Also read: Lockdown 4.0: Amazon, Flipkart to deliver phones, laptops, other non-essential items in red zones