The pioneer of India’s hyperlocal delivery space continues to be on the brink.
Dunzo, which had previously delayed the June salaries of employees and had said it would pay them by mid July, and had then delayed them to 4th September, has now further delayed them to the first week October . “We sincerely apologize for this delay. Ensuring that you receive your due compensation as early as possible is our top priority. Please be assured that we are doing everything to make this happen, and we are confident that there will be no further delays after this,” an email sent by Dunzo to its employees said.
“Please note that pending salaries for the months of June and July, due to be paid on September 4, will be paid in the first week of October. You will receive the salary dues along with a 12 percent p.a. interest, which will now be calculated for an additional month,” the email added.
Dunzo said that it hoped for some funds to come through, which would allow it to pay salaries. “We have made positive progress on funding and aim to close procedural requirements in September. In the meantime, we wanted to clear August salaries as per the committed timeline,” the email said.
Dunzo has been forced to look for ways to cut costs after being faced with a severe cash crunch. The company had been forced to cap June salaries to maintain its cash flow numbers, which are tracked by its lenders. Failing to meet those targets could’ve meant that Dunzo would’ve been in breach of its loan covenants, which could allow its creditors to take action against the company. Dunzo had reportedly estimated that it needs to reduce spends by 30-40% to continue to run its operations, and this has necessitated withholding salaries and employee layoffs.
It’s an unfortunate situation at Dunzo, made doubly unfortunate by the fact that it had essentially created the hyperlocal delivery category in India. Dunzo had been the earliest mover in the hyperlocal delivery space all the way back in 2014, when it had started off as a simple WhatsApp Group which allowed people to send across items in Bangalore. It had slowly grown, and become synonymous with hyperlocal deliveries in Bangalore, delivering all manner of products and items. This had even prompted tech behemoth Google to invest in the company in 2017, making it one of Google’s first investments in India.
Dunzo, however, found it hard to expand beyond concierge services. It experimented with food delivery, but found it hard to compete against Zomato and Swiggy. Dunzo had then focussed on delivering groceries, where it had to compete against players like Zepto, Big Basket, and Blinkit. Meanwhile, other companies began treading on its turf — Swiggy launched a competing product, Swiggy Genie, which provided the same concierge services that Dunzo had pioneered.
And Dunzo now appears to be struggling, even after Reliance had picked up a 25% stake in the company in 2022 for Rs. 1,500 crore. But Dunzo isn’t the only Indian startup that’s struggling in recent times — more than a dozen Indian startup unicorns have fired employees this year, and several companies have shut down entirely. It remains to be seen if Dunzo can bounce back, but amid layoffs, delayed salaries and more layoffs, the startup currently seems to be staring at the abyss.