Zomato Lays Off 600 Employees Amid Cost-Cutting and AI Automation

Online food delivery giant Zomato has reportedly laid off around 600 employees as part of a broader cost-cutting strategy. This decision comes amid challenges in its core food delivery business and rising losses in its quick commerce arm, Blinkit.

Why the Layoffs?

According to reports, Zomato had hired approximately 1,500 employees last year under its Zomato Associate Accelerator Program (ZAAP) to handle customer support roles. However, in recent weeks, about 600 of these employees were let go. The affected employees primarily worked in customer support and were reportedly dismissed without prior notice or an opportunity to improve their performance.

The layoffs are part of Zomato’s strategy to reduce operational costs, with the company now relying more on artificial intelligence (AI) for customer support. Automation is expected to streamline processes, reduce expenses, and improve efficiency.

Compensation and Employee Concerns

Employees who were laid off received one month’s salary as compensation. The terminations were reportedly based on performance-related issues, including punctuality. However, many affected employees have taken to social media, sharing their grievances and claiming the layoffs were abrupt.

In various Reddit posts, former employees expressed frustration, alleging they were fired without prior warning. One user claimed they were dismissed for being late by an average of just 28 minutes over three months, despite meeting performance metrics. Another alleged that over 500 employees were fired without any accountability, calling it a “corporate playbook” where companies extract maximum effort from workers and then replace them without warning.

The layoffs have impacted workers in cities like Gurugram and Hyderabad, raising concerns among remaining employees about job security.

Zomato’s Business Challenges

Zomato is facing multiple hurdles, including:

• Slow growth in the food delivery sector
• Mounting losses in its quick commerce business, Blinkit
• Rising competition from rivals like Swiggy and other instant grocery delivery platforms

Introduction of Nugget: Zomato’s AI-Driven Customer Support

The layoffs come shortly after Zomato introduced Nugget, an AI-powered no-code customer support platform. This tool is designed to help businesses automate customer service processes without needing complex technical expertise. The shift toward automation indicates Zomato’s commitment to reducing reliance on human customer support staff and cutting costs in the long run.

Stock Market Reaction & Analyst Downgrade

Despite the layoffs, Zomato’s stock saw a modest increase of 0.84% on Tuesday, closing at ₹203.20 per share. However, concerns about slowing growth persist. Last month, Bank of America (BofA) downgraded Zomato’s stock rating from ‘buy’ to ‘neutral’, citing increasing competition and a slowdown in food delivery demand.

What’s Next for Zomato?

As Zomato shifts towards automation, it remains to be seen how this will impact its service quality and customer satisfaction. While AI integration may reduce costs, customer support is a crucial element in food delivery, and any decline in service quality could affect brand loyalty.