DoorDash Tees up More Pain After Layoffs

Ushering people out the door: Layoffs have become all too common an occurrence these days, with tech companies being hit particularly hard. However, another group finding it difficult is delivery, with companies like Gopuff and Shipt hitting snag after snag. Now, DoorDash has become the latest victim of the economic state of the world, with the company laying off 1,250 employees in a bid to remain afloat.

DoorDash is trying to reduce costs, which is what led to the recent layoffs. The CEO of the company, Tony Xu, messaged employees to explain the situation. He discussed how the pandemic offered unprecedented opportunities for companies, something especially true in the delivery sector, and how that led to overhiring.

“Most of our investments are paying off, and while we’ve always been disciplined in how we have managed our business and operational metrics, we were not as rigorous as we should have been in managing our team growth,” wrote Xu.

• The company had to address its operating costs in order to stop them from exceeding sales growth, otherwise, there would be problems in the future.
• Xu mentioned reducing other operating expenses aside from headcount, but he said it would not be enough and was the primary reason he had to make the decision.

Many companies have struggled with hiring during the pandemic. During the pandemic, demand for certain services was higher, and they were seeing extreme growth. Because of that, many hired too many people or expanded beyond their means with the thought that the money would be there. Delivery companies were hit particularly hard.

Employees will be compensated. The basic compensation includes 13 weeks of pay and a single lump-sum payment for four weeks. Additionally, those impacted by the round of layoffs will receive their February 2023 stock vest. Finally, Xu said that any visa-sponsored workers will receive additional time to allow them to find a new job.

• Employees relying on DoorDash for a visa will be given a termination date of March 1st, 2023, making it easier for them to transition to another job smoothly.
• Healthcare will also continue for workers until March 31st, 2023, with an option to opt-in and pay for COBRA coverage after.

It might not be the end. While Xu said that DoorDash has a more resilient business than other ecommerce companies, it might not be enough. That is especially true if the recession runs deep, which could throw everything into a tailspin and see DoorDash and other companies poised for further layoffs and damage control.

Delivery services find themselves especially vulnerable. While hiring too many people and the end of the pandemic hurt delivery companies, the economic situation provides another issue. Delivery companies have been forced to charge more to keep up with inflation, gas prices, and other issues, and at the same time, customers are hurting for money. That means people are less willing to pay for convenience, which is what delivery represents, and it is unlikely to get better until the economy does.