In an email to employees announcing the layoff of 380 personnel, Swiggy founder and CEO Sriharsha Majety said that the slowdown in food delivery growth necessitated a review of the company's profitability goals.
“The growth rate for food delivery has slowed down versus our projections (along with many peer companies globally ). This meant that we needed to revisit our overall indirect costs to hit our profitability goals..,” he said in the e-mail.
“While we’d already initiated actions on other indirect costs like infrastructure, office/facilities, etc, we needed to right-size our overall personnel costs also inline with the projections for the future. Our overhiring is a case of poor judgement, and I should’ve done better here,” he added.
The company's founder stated that they initially invested in response to the increased demand for food delivery during the second wave of Covid-19 in 2021. However, due to difficult economic conditions in the past year, they are now reevaluating their goals. The company is also reviewing its other business areas, and has closed down its meat marketplace.
Majety emphasised that during the past year, several additional pockets of employees were added as a result of scale-up, which increased the company's 'communication overheads' and compromised its agility.
“Operating in multiple hyper-competitive categories means that we have very little room to slow down and we wanted to arrive at a more deliberate org design to be more nimble, effective, and efficient at the same time. We’re already implementing the learning from this org-effectiveness work to not let this miss happen again,” he explained.
However, Swiggy had seen significant growth in its total sales and order volume in the first six months of 2022, according to one of its biggest investor Prosus.
Its food delivery business clocked a growth of 38 percent in terms of number of orders and 40 percent in terms of gross order value in the first six months of the year. As per the Prosus report, the restaurant food delivery GMV stood at $1.3 billion, while quick commerce GMV was $257 million, at the end of the first half of 2022.
However, rising inflation impacted e-commerce demand in the second half of 2022, evidenced by the fact that companies such as Zomato and Delhivery experienced slower growth.
For instance, Zomato’s gross order value for its food business rose only 3 percent in the September quarter compared to the preceding quarter.
The listed food delivery company’s growth has slowed as it has become bigger – quarterly sales have grown only 22 percent from Rs 5,410 crore in Q2 of FY21 to Rs 6,631 crore in Q2 of FY22.
Swiggy also intends to list on the stock exchanges, having hired investment bankers early last year to raise $1 billion, according to a Moneycontrol report. However, nothing has materialised on that front as its tech peers such as Zomato, Paytm, Nykaa, and Delhivery have been hammered in the stock market.
Swiggy recently reported a net loss of Rs 3,628.9 crore for FY22. The company's revenue from operations increased 125 percent to Rs 5,704.9 crore in FY22, according to financial data accessed by the business intelligence platform Tofler.
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