Zomato Trims 600 Jobs Amid Increasing Automation, Quick Commerce Wars

Zomato Shares Dip Over 3% After Sensex Debut

SUMMARY

As per a report, the employees were laid off due to performance issues, tardiness, and an overall restructuring effort at the foodtech major

The job cuts come less than a year after the company hired the employees under the ZAAP. A majority of the employees failed to get renewals at the end of their tenures

Last month, BofA Securities downgraded Zomato’s shares to ‘Neutral’ from ‘Buy’ and trimmed the target price to INR 250 per share from INR 300 earlier

Amid slowing growth in its food delivery vertical and rising competition in the quick commerce space, foodtech giant Zomato

has reportedly laid off nearly 600 employees from its customer support team.

As per Outlook Business report, the employees were laid off due to performance issues, tardiness, and an overall restructuring effort at the foodtech major. Besides, Zomato has been increasingly leveraging AI to automate its customer support functions to trim costs.

The job cuts come less than a year after the foodtech giant hired the impacted employees under the Zomato Associate Accelerator Program (ZAAP). However, a majority of the contractual workers reportedly failed to get renewals at the end of their tenures.

“A majority of employees hired under ZAAP last year have been let go over the last week without any clear explanation,” a Zomato customer support employee told the publication. The layoffs were reported in cities such as Gurugram and Hyderabad.

Unnamed aggrieved employees reportedly said that they received one month’s salary as compensation but were terminated without a notice period.

Meanwhile, some of the impacted employees also took to social media to express their frustration over the abrupt terminations. One Reddit user claimed they were fired for being late by an average of 28 minutes over three months, despite strong performance metrics.

Another Reddit user said, “They (Zomato) are being inhumane in this scenario, no warnings no nothing, boom Slack deactivated, account taken down within minutes and you’re out of the org before you can speak for yourself.”

Zomato didn’t respond to Inc42’s queries on the subject till the time of publishing this story.

Zomato’s AI Push & Rising Quick Commerce Competition

The layoffs come at a time when Zomato has been actively integrating AI to automate customer support functions, reducing the need for human intervention.

With its agentic AI based customer support platform Nugget, the company claims to have reduced the resolution time by 20%. The platform handles over 15 Mn queries per month across Zomato, Blinkit, and Hyperpure. The deployment of AI has also reportedly helped Zomato cut response times by 75%.

After seeing the success of the AI platform internally, Zomato, in February, also rolled out Nugget for other enterprises as well.

The development also comes at a time when Zomato has been bearing the brunt of rising competition in the quick commerce space.

The foodtech giant’s quick commerce arm Blinkit saw its adjusted EBITDA loss surge nearly 13X to INR 103 Cr in the third quarter (Q3) of the fiscal year 2024-25 (FY25) from INR 8 Cr in the preceding quarter.

Meanwhile, the company’s food delivery business also seems to be slowing down. Recently, brokerage firm BofA Securities downgraded the ratings for Zomato and Swiggy amid concerns over the growth of food delivery and increasing competitive pressure in the quick commerce arena.

The brokerage downgraded Zomato’s shares to ‘Neutral’ from ‘Buy’ and trimmed the target price to INR 250 per share from INR 300

Shares of Zomato ended today’s trading session 0.27% higher at INR 202.05 on the BSE.