DoorDash announced Wednesday that it laid off roughly 1,250 corporate workers, a move CEO Tony Xu called “the most difficult change” in the company’s history. It amounts to about 6 percent of the brand’s workforce.
Third-party delivery companies expanded significantly during the pandemic as restrictions pushed homebound customers to demand convenience. Xu said the company was undersized prior to COVID, so it quickly filled roles to meet the needs of merchants, customers, and delivery drivers. While most of those investments paid off, the CEO noted that DoorDash wasn’t as meticulous as it should have been concerning how big the team was growing. Operating expenses have increased in the midst of recession and inflationary talks nationwide. He added that reducing non-headcount costs wasn’t enough to close the gap.
“While our business continues to grow fast, given how quickly we hired, our operating expenses—if left unabated—would continue to outgrow our revenue,” Xu said in a blog post.
DoorDash reported that revenue soared to $1.7 billion in Q3, a bump from $1.28 billion last year. However, net loss ballooned from $101 million in 2021 to $296 million this year. Neil Saunders, managing director of GlobalData, told the Associated Press that DoorDash is losing about 70 cents per order, compared to losing 41 cents per order at the start of 2022.
“All the metrics are pointing in the wrong direction,” the expert told the publication.
Impacted employees will receive 17 weeks of compensation, their February 2023 stock vest, healthcare benefits through March 31, immigration support until March 1, and the creation of a directory for companies to reach and recruit workers.
“Just as our mission hasn’t changed, neither has our strategy,” Xu said. “Our business fundamentals remain strong. But as I’ve said before, what got us here won’t necessarily bring us to the next stage and we have to tailor some of our tactics. Looking ahead, we’re confident that we have reset the size and shape of our organization to match our strategic priorities. We must keep this level of discipline moving forward.”
A number of large companies have announced layoffs in the past few months, including Amazon, Facebook, and Twitter. The economy hit the food tech segment as well with sunday, Lunchbox, ChowNow, REEF, and Nextbite announcing cuts in the summer months.
DoorDash is the largest third-party delivery company in the U.S. In May, the company accounted for 59 percent of meal delivery sales, followed by Uber Eats (24 percent), Grubhub (13 percent), and (Postmates), according to Bloomberg Second Measure.