Cost-cutting round in JioMart: 1,000 jobs axed, many more to come

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Bleeding from aggressive deep discounts offered to take control of the online wholesale groceries distribution business to neighbourhood stores for more than a year, JioMart has embarked on a retrenchment exercise to cut costs, issuing pink slips to more than 1,000 employees in the past few days.

Quoting insiders, The Economic Times has claimed in a report that the wholesale distribution arm of Reliance Industries has decided to get rid of two-thirds of the 15,000-strong workforce in the next few weeks. The company is also in the process of shutting down 150 fulfilment stores, which are used to deliver general goods and merchandise to mom-and-pop stores in different neighbourhoods.

The authorities have decided to wield the axe close on the heels of concluding the deal with German MNC Metro Cash and Carry.  Metro had sold all 31 stores in India to Reliance at a consideration of Rs 2,850 crore. Metro Cash and Carry is also in the business of wholesale directed at groceries and general provision stores. The exercise is also aimed at reorganising overlap of roles since the acquisition of the German company’s operations meant also taking on its 3,500 employees.

Quoting an official of JioMart, the report said that included in the 1,000 pink slips already issued were 500 from the company’s corporate centre and an equal number from the field operations.

Soon there would another round of pink slips. The company has already put hundreds of employees under a performance improvement plan. Many had the fixed component of their compensation reduced with an expansion of the variable component of pay.

Organised retail and wholesale operations control only 10-15% of the country’s fast-expanding sales of fast moving consumer goods. Many are of the view that consumer product companies are gradually shifting focus to the online B2B operations to supplement their current distribution network.

Some analysts also believe that eB2B operations can muster 50% return on investments which is far higher than that offered by the offline formats.