Bengaluru/New Delhi: Grofers India Pvt. Ltd, the grocery delivery start-up funded by Softbank Corp. and Tiger Global Management, will lay off 10% of its workforce, even as it revoked job offers to fresh graduates, citing adverse market conditions.
Employees at the customer support and content team will take the biggest hit, human resources head Rishi Arora said in an email to employees on Wednesday. The company has about 1,500-2,000 employees.
Grofers joins a long list of start-ups that have trimmed their headcounts because of slower-than-expected growth and a funding crunch, including Zomato Media Pvt. Ltd, Tinyowl Technology Pvt. Ltd, LocalOye (Imma Imma Web Pvt. Ltd), HelpChat, Runnr (Carthero Technologies Pvt. Ltd) and Commonfloor (maxHeap Technologies Pvt. Ltd).
“The primary driver of this decision is our changing growth trajectory. We grew at an insane pace last year but given that as of April this year, we have effectively reduced marketing spend next to nothing. We don’t foresee the same growth rates to continue,” said the email from Arora to employees. “This is also driven by a general slowdown in activity in the market, which we don’t see improving in the next few months, and which is a reality we want to adjust to as quickly as possible.”
The firm will pay the employees a month’s salary as severance pay. Mint has reviewed a copy of the email.
Earlier, on Tuesday, Grofers revoked 67 job offers to students who were scheduled to join the start-up in July, citing market conditions. The firm emailed its decision to the National Institute of Technologies (NITs) at Allahabad and Surathkal; Birla Institute of Technology and Science (BITS) Pilani and its Goa campus; and the Indian School of Mines in Dhanbad.
Muralidhar Kulkarni, professor in charge of training and placement at NIT Surathkal, confirmed that Grofers had revoked offers made to seven students. Emails to the placement cells of other institutes went unanswered.
Grofers chief executive Albinder Dhindsa confirmed the development. “We revoked about 67 offers mostly for joinees into operations. We are downsizing some of the teams given the market environment and our revised growth projections. Most of the joinees were supposed to be for these teams. We are still talking to the institutes and the affected individuals to figure out a way forward,” he said in an email response.
The Grofers move comes barely a month after India’s largest shopping portal, Flipkart Ltd, delayed joining dates for 17 graduates from the Indian Institute of Management (IIM), Ahmedabad, by six months, angering premier engineering and management institutes across the country.
The company, which shares a common investor with Grofers, Tiger Global, however, promised a joining bonus of Rs.1.5 lakh to the affected students.
“Grofers even offered us temporary accommodation in Gurgaon one day prior to rescinding our offer. I had given up many opportunities due to Grofers. For most companies, the recruitment cycle spreads from January to June. At this moment, it is quite difficult to find good opportunities,” said Rohan Coelho, a student of BITS Pilani, Goa, whose offer was revoked by Grofers.
At IIM Bangalore, Hopscotch and CarDekho have deferred joining dates of graduates. At the Indian Institute of Technology (IIT), Guwahati, Roadrunnr (which rebranded itself as Runnr in June) and Click Labs have deferred joining dates, Mint reported on 27 May. Companies defer joining dates when they are unable to predict or wrongly predict the demand for fresh recruits. Most start-ups in India are struggling to meet their hiring commitments in the face of a funding crunch.
Overall, about 150 students across IITs may be affected by these start-ups’ decision to delay the joining date and the list of such companies may get longer.
The IITs blacklisted six start-ups that went back on their word to hire graduates in the upcoming placement season. Besides, start-ups that cite the business environment to slash salaries they had originally committed to paying IIT graduates also risk being blacklisted if they do not accept the students at the promised package. At least five firms had reduced salaries by as much as 25%, Mint reported on 3 June.
Apart from discounts and advertising, employee costs are the largest expense for e-commerce companies.
The developments come at a time when even well-capitalized start-ups such as Flipkart and Grofers are struggling to raise more funds at their current valuations. All these firms had spent heavily on customer acquisition and marketing during the heydays when funds were readily available, resulting in poor unit economics and high cash burn.
So-called hyperlocal grocery delivery start-ups such as Grofers accept orders from consumers on an app, collect items from nearby stores and deliver them, often at a discounted price.
These firms, which operate on thin margins, lose money on every order because of discounts and offers in an attempt to attract more consumers.
To be sure, Grofers is the best-capitalized hyperlocal delivery start-up, having raised about $165 million from Softbank, Tiger Global and Sequoia Capital. Its nearest rival, PepperTap, which raised about $51 million, shut down consumer-facing delivery operations in April.
On 5 January, Mint reported that Grofers had rolled back operations in nine cities in the past 15 days because of poor demand.