Zomato, the massive food delivery service, has made news once more, but not for the reasons it had planned. Only a year after hiring 600 customer support associates under its Zomato Associate Accelerator Program (ZAAP), the company has made the unexpected decision to lay them off. Employees say they were fired without warning, and the decision has shocked the company’s personnel.
Zomato has not made an official statement regarding the layoffs, but according to reports, the company is actively utilizing artificial intelligence (AI) to automate its customer care operations. The layoffs come as its rapid commerce division, Blinkit, is losing money and its main food delivery business is growing more slowly. In this article, we will look into the reasons behind Zomato’s recent layoffs, its increasing reliance on AI, the financial pressures from Blinkit, and what this means for the company’s future.
Automation Over Jobs? The AI Takeover
Zomato’s decision to downsize its customer support team is closely tied to its increasing reliance on AI-driven automation. The company recently introduced Nugget, an AI-powered customer support platform that is already handling over 15 million interactions per month for Zomato, Blinkit, and its restaurant supply service, Hyperpure.
While AI can certainly improve efficiency, it also raises concerns about job security in the tech-driven service industry. Employees claim that roles are being made redundant due to automation, with several contractual workers not having their tenures renewed. This shift signals a larger industry trend where AI is reshaping customer support and operations.
ZAAP Employees Left in the Lurch
The layoffs mostly affect workers who were recruited through Zomato’s Associate Accelerator Program (ZAAP), a program that offered career advancement in divisions such as supply chain, operations, and sales. But the vast majority of these workers, who were dispersed throughout Zomato’s Hyderabad and Gurugram offices, were fired without warning. Many workers claimed to have only received one month’s pay in compensation, and terminations were attributed to “poor performance” and “poor punctuality.”
“The atmosphere in the office has become tense. No one knows who’s next,” said a current customer support associate on condition of anonymity.
Financial Struggles: The Blinkit Burden
The layoffs come at a time when Zomato is facing financial headwinds. While its revenue grew by an impressive 64% year-on-year (YoY) in Q3 FY25, reaching Rs 5,404 crore, its profit after tax (PAT) dropped by 57%, falling to just Rs 59 crore compared to Rs 138 crore in the same period last year.
A major factor contributing to this decline is Blinkit, Zomato’s quick commerce division, which has been bleeding cash due to aggressive expansion and increasing competition. Quick commerce rivals like Zepto, Swiggy Instamart, and BigBasket have been expanding at a rapid pace, making profitability elusive for Blinkit.
Leadership Exodus: A Troubling Trend?
Zomato’s problems have been exacerbated by a string of well-publicized departures in recent years. Akriti Chopra, the chief people officer and co-founder, left in September 2023. Rahul Ganjoo, the company’s head of food delivery, co-founder Mohit Gupta, and former CTO Gunjan Patidar had previously departed. Concerns regarding Zomato’s internal stability and strategic direction are raised by such frequent changes in leadership.
Balancing Growth and Stability
Zomato is reaching a turning point in its development. AI-powered automation has the ability to lower costs and improve operational efficiency, but it also eliminates jobs, which irritates employees and raises ethical concerns. Furthermore, its budget is already feeling the effects of its quick trade expansion, even though it holds promise for the future.
Credits: Money Control
To effectively navigate this stage, Zomato must strike a delicate balance between innovation, labor management, and financial sustainability. Will the company suffer from rapid cost-cutting and leadership churn, or will AI-driven automation be the secret to its long-term success? We’ll find out in time.
