colombia’s rappi to lay off ~300 employees, in rude awakening to new 2020 reality
Contxto – Say goodbye to the long-lived era of massive growth. Profitability is 2020’s fashion trend.
Rappi, Latin America’s role model for a fast-growing company, announced its plans to cut costs, especially within the company’s payroll.
In fact, 6 percent of the company’s entire workforce will be let go. According to Brazil Journal, there are currently around 5,000 employees throughout Rappi’s regional offices. If you do the math, this would total an estimated 300 employees. Former employees, I should say…
“In 2020 we have decided to double down on our technology team and to focus on our user experience. In order to achieve this vision, we made the decision to reduce some areas and increase the size of others to achieve our goal for the present year and deliver an even better experience for our users. In total, the number of people who were impacted by the decision across [Latin America] was about 6% of the people in the company. This decision is not a reflection of our growth plans, and we are in fact actively hiring a large number of people in our areas of focus for 2020.”
—Rappi spokesperson to Reuters
Something many SoftBank-backed companies share in common is their lifecycle. Massive growth is usually followed by a growth peak and eventually massive layoffs. Could this be the actual SoftBank effect?
The company informed that the decision was made by the “internal leadership team,” which may include SoftBank’s representative in the company’s Board.
Interestingly enough, this is not the only company seriously looking at itself in the mirror and addressing its flaws. I assume, based on the Uber and WeWork scandals, as well as other interesting stories from the past couple of months, that SoftBank has been under investor and public scrutiny for its other portfolio companies not turning out the same way.
Similarly, Lime has recently decided to leave many markets, to focus on profitability rather than rapid growth and market share. Seems like some folks are going through with their new year’s resolutions.
The problem with a company’s raising so much capital is the ease to which they can operate and market their products even if unprofitable on a unitary basis. Rappi’s aggressive marketing campaigns and promotions certainly don’t seem very profitable per transaction and appear to rather be user activation hacks.
I truly believe Rappi is a viable business model and certainly a very good alternative for both consumers and deliverers. Nevertheless, its ambition for rapid growth may have built a large fixed costs spreadsheet, which is unable to meet unless there is some sort of cash inflow. No matter how they get it.
According to Rappi’s President, Sebastián Mejía, though, the company’s main goal will still be rapid growth. Allegedly, the funders are still on board with the original plan. Let’s see.
Wanna hear more? We recommend you listen to the following podcast episode: Uber contra el gobierno colombiano (Continuación) y la aparente “tendencia” de la rentabilidad. Time stamp available in the description.
-VC
