The pioneer of India’s hyperlocal delivery space is currently on the brink.
Dunzo, which had previously delayed the June salaries of employees and had said it would pay them by mid July, has now delayed them to 4th September. The company also begun firing employees in a fresh round of layoffs. Dunzo had already laid off employees in January and April this year.
“For those team members who were expecting the balance pay-outs of their June salary during this week, we regret to inform you that this has been delayed,” Dunzo told employees in an internal note. “The pending salaries for June will now be paid on September 4th, 2023. Additionally, the July salary for all team members will be paid only on September 4th along with the August salary,” the note added.
Yesterday, Dunzo co-founder and CTO Mukund Jha had told employees that the company would also undertake another round of layoffs. Today, several employees have been told today their roles would be redundant as the company needs to save capital by reducing corporate costs.
Dunzo had paid only 50% of the salaries to employees earning more than Rs. 75,000 per month for the month of June, and had said it would pay the remaining amounts by mid July. The delay in salaries had come after a string of layoffs at the hyperlocal delivery company. In January 2023, Dunzo had laid off 60-80 employees, followed by a layoff of 300 employees in April. Dunzo had also shut down 50% of its dark stores to cut costs.
Dunzo has been forced to look for ways to cut costs after being faced with a severe cash crunch. The company had 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 has 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.