Foodtech major Zomato has fired nearly 70-100 employees from its customer support team in Gurgaon in its latest cost-cutting drive. The Gurgaon headquartered startup has confirmed the development. However, the company claims that downsizing of the support team is not due to financial non-performance but correction carried out owing to improvement in overall service quality.
Talking to a reputed business daily, Zomato further claimed that its service quality over the last few months have improved significantly and therefore it now needs less support from the customer support team.
According to sources privy to the matter, Zomato as of today spends anywhere between Rs 4 – Rs 5 per order on customer support and after-sales services. This fact pretty much also holds true for Swiggy. The cost of Rs 4 – Rs 5 on per order incurred for customer support & after-sales services is presumably proving to be very costly for both players.
There cannot be any two ways that after achieving a desirable scale, both Zomato and Swiggy will be in pressure to show profit to their investors. This critical goal won’t be achieved unless both companies tighten up their cost-cutting measures and maintain a control on their balance sheet.
Over the last few months, there also have been undeniable signs that India’s burgeoning online food delivery sector is going through a major consolidation phase, with Ola suspending its food delivery business ‘FoodPanda’ and UberEats looking to sell its India business. Even Zomato recently sold its UAE business for nearly $172 Mn to meet operational costs.
Industry experts argue that the foodtech sector has reached a critical stage where only the fittest players will eventually survive while the more vulnerable players will either merge or simply quit the market. Now it is to be seen whether this consolidation phase will have any impact of Zomato and Swiggy’ ability to raise fresh funds.