Dunzo’s Financial Woes, Delayed Salaries, Layoffs, And Uncertain Times; Will Dunzo Be Able To OutWeigh Its Challenges?

Troubles at Dunzo don’t seem to be abating; the quick commerce startup is facing severe financial difficulties and has informed its employees that pending salaries for June and July will be paid in November.

This delay in salary payments, which has occurred multiple times, was communicated by the company’s founder and CEO, Kabeer Biswas, during an internal meeting.

As part of cost-cutting measures, Dunzo is also considering relocating from its current headquarters on Wind Tunnel Road in Bengaluru, though the new location remains uncertain.

Moreover, Biswas hinted at the possibility of further layoffs if the company’s cash flow situation deteriorates but did not provide specific details. Simultaneously, he assured employees that September salaries would be paid on time in the first week of October.

Previously, Dunzo had faced employee protests when it attempted to use the payroll financing app OneTap to distribute August salaries, leading to concerns about liability and as of Friday, some employees, as per reports, had yet to receive their August salaries.

From The High’s To The Low’s
Dunzo, once valued at $757 million and backed by prominent companies like Reliance Retail, Google, Blacksoil India, and Blume Ventures, has been grappling with financial losses, layoffs, non-payment disputes with Facebook, and the closure of some of its dark stores, which are dedicated to online shopping fulfilment.

Even though Dunzo received significant funding from Reliance Retail and Google in 2022, it reported substantial losses in FY22, with an EBITDA loss exceeding Rs 176 crore by June 2022. Also, its core business, Dunzo Daily, incurred losses of Rs 230 per order during the first half of 2022, further challenging the company’s financial stability.

Hence, in November 2022, Dunzo closed some of its dark stores in Delhi-NCR and other regions, which impacted permanent and contractual employees.

The company’s struggles continued into 2023, with layoffs affecting approximately 300 employees in April due to financial constraints during a “funding winter,” despite raising $75 million through convertible notes.

In July 2023, Dunzo deferred 50 per cent of salaries for certain managerial positions and delayed salary payments for June and July, causing uncertainty among employees about their financial well-being.

Likewise, Dunzo faced legal issues related to unpaid dues, including lawsuits from Facebook India Online Services Private Limited and Nilenso, a software consulting firm, for non-payment of dues; to add more to the troubles, Google, Dunzo’s second-largest backer, also issued a legal notice demanding unpaid dues.

Serious Questions On Sustainability
The challenges faced by Dunzo and other quick commerce startups, such as Blinkit and Zepto, raise questions about the sustainability of the quick commerce model in the Indian startup ecosystem.

While the quick commerce model appeared promising initially, it has run into roadblocks that have resulted in financial and operational difficulties for most businesses.

In specific contexts, the quick commerce model can be a good business model, focusing on hyperlocal and on-demand delivery of goods and services since it provides customers with convenience and speed, which are highly valued in today’s fast-paced world.

However, as with any business model, challenges like high warehousing costs, the need for a large workforce, and slim profit margins have posed operational and financial difficulties for these businesses. Moreover, the fact that customers are often hesitant to pay premiums for faster deliveries, preferring physical stores for certain purchases, has further affected the profitability of the business models.

The Last Bit, Dunzo’s turbulent journey, indicates the underlying problem in the Indian startup ecosystem, the importance of financial prudence, adaptability, and sustainable growth for startups.

At the same time, it also emphasises the need for a deeper understanding of the Indian market’s nuances, where customer preferences, cost structures, and competition can make or break businesses.

The delayed salary payments, layoffs, and legal disputes have exposed the vulnerabilities of a business model that promises convenience and speed but grapples with high operational costs and razor-thin profit margins.

The future remains uncertain for Dunzo, but its trials and tribulations provide valuable lessons for aspiring entrepreneurs and investors.