Zomato's recent decision to lay off 600 customer support employees, just one year after their recruitment, is a significant move in response to a number of challenges the company has been facing. This decision, which primarily affects employees hired under the Zomato Associate Accelerator Program (ZAAP), signals a shift towards greater automation and cost-cutting measures. The company's food delivery business, a cornerstone of Zomato's operations, has been experiencing slower growth, and the company is grappling with increasing losses from its quick commerce division, Blinkit.
ZAAP, a program designed to recruit and upskill customer support staff, initially hired around 1,500 employees with the promise of promoting them to roles in sales, operations, supply chain, and other departments within a year. However, in a disappointing turn of events, many of these employees have seen their contracts terminated, and their opportunities for growth within the company have been abruptly halted. Those who were affected by the layoffs are being provided with one month’s salary as compensation, but many of them have reported being let go without prior notice and with little explanation.
According to some employees who spoke anonymously, there was a general feeling of frustration and confusion. Many of them had no idea why they were being let go, despite their relatively short tenure with the company. A recurring sentiment among the terminated employees is that Zomato’s increasing reliance on automation, particularly AI-powered systems, has made their roles redundant. This shift is embodied in the launch of Nugget, an AI-powered customer support platform developed by Zomato. Nugget currently handles millions of customer interactions each month for Zomato, Blinkit, and Hyperpure, Zomato's other verticals. While Nugget and similar technologies are seen as a way to enhance operational efficiency, the growing automation of customer support roles leaves many employees out of work.
This increased use of AI in customer support reflects a broader trend in the company, one that has been pushed forward as a means of cutting costs and improving service efficiency. However, it has also contributed to uncertainty within the company, as employees worry about their future prospects and the potential for further layoffs. While automation may be helping to streamline operations, it is also a contributing factor to Zomato’s current struggles. In particular, the company's Blinkit division, which focuses on quick commerce or rapid delivery of groceries and essentials, continues to face financial setbacks, leading to rising losses in that sector.
Adding to Zomato’s woes are leadership changes within the company. Over the past year, several high-ranking executives, including Akriti Chopra, the Co-founder and Chief People Officer, have left the company. These departures have added to the sense of instability and uncertainty at Zomato, as employees and investors alike try to navigate the changing corporate environment.
For the third quarter of FY25, Zomato reported a 57% year-on-year decline in its quarterly profit after tax. This sharp drop in profit, despite a significant 64% increase in revenue from operations, highlights the ongoing financial pressures the company is under. The disparity between revenue growth and profitability is indicative of the challenges Zomato is facing as it balances its expansion into new areas like Blinkit with the realities of a slowing core business. While Zomato is still posting impressive revenue figures, its financial health remains a concern, and it faces mounting pressure to find a sustainable path forward.
This difficult period in Zomato’s growth trajectory comes at a time when the company’s future direction seems uncertain. The decision to automate customer service and streamline operations is one of the many ways the company is attempting to adapt to changing market conditions, but the impact on employees and its long-term sustainability remains to be seen. Zomato's ability to navigate these challenges while maintaining its position as a leader in food delivery and quick commerce will likely depend on how effectively it can balance innovation and human capital in an increasingly automated world. The company’s ability to regain investor confidence and stabilize its operations will be closely watched in the coming months as it continues to adapt to the changing business landscape.
