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Cash-strapped quick commerce firm Dunzo found itself in hot water after several workers at its dark stores in Bengaluru did not return to work because of a delay in their July salaries.
Consequently, its dark stores in the city’s Indiranagar, Richmond Town, and HSR Layout halted their operations on Wednesday. Its two stores in Kormangala and ITI Layout are already unserviceable since Monday.
The company currently operates seven dark stores in its home base of Bengaluru, after scaling back its operations amid a severe cash crunch. It reportedly operated around 250 stores earlier.
Salaries of around 70 off-roll workers across its dark store network in the city have been deferred, according to media reports. These include workers responsible for packing groceries and handing them to delivery executives.
Dunzo, on the other hand, claimed that it is “live in more than 95 per cent of our geos in Bengaluru, except in a couple of areas where we are transitioning to partner stores. We should be operational in these areas soon.”
To put a leash on expenses, the company has put in place a new hybrid marketplace business model, “which is a combination of dark stores and partner stores”.”
Under this, Dunzo is focusing on sourcing its products directly from the nearest supermarkets and merchants to deliver to customers, rather than relying on the traditional dark store model adopted by its competitors.
“This network is dynamic and continues to evolve. Where it makes business sense for us to have partner stores, we will switch to that model,” a company spokesperson said.
Dunzo switched to this model around six months ago, and now operates a mix of dark stores and partner stores, depending on traffic density and a few other factors. “We believe this model delivers the best unit economics in q-commerce,” the spokesperson added.
The cash-strapped had, last month, deferred the June and July salaries of over 50 per cent of its workforce of 1,000 to the first week of September. It also capped employee salaries at Rs. 75,000, irrespective of their pay package.
Dunzo’s salary deferrals come even as the firm raised $75 million in funding through convertible notes in April this year, indicating its high cash burn rate.
The delivery platform had, at the same time, laid off around 30 per cent of its workforce or about 300 workers, CEO Kabeer Biswas had told employees during a town hall as the firm looked to revamp its business model. Dunzo had previously let go of 3 per cent of its workforce – around 80 workers – in January.
The company’s primary business Dunzo Daily, which contributes around 90 per cent of its revenue, has significantly scaled down its operations. It competes with the likes of Y Combinator-backed Zepto, Zomato-owned Blinkit, and Swiggy Instamart.
The Bengaluru-based firm has raised around $500 million in funding since its inception from the likes of Reliance – its largest investor with a 25.6 per cent share -- and Google, which has around 19 per cent stake, according to data from Tracxn, a market intelligence platform.
Other notable investors of the delivery platform include Blume Ventures, Lightrock, Lightbox, and Alteria Capital.
In FY22, Dunzo’s revenue stood at Rs. 54.3 crore, up from Rs. 25.1 crore the previous year, according to Ministry of Corporate Affairs filings. The company’s loss, on the other hand, widened twofold to Rs. 464 crore in FY22, versus Rs. 229.1 crore in FY21.
