DoorDash says it is laying off around 1,250 employees in the latest instance of belt tightening at a well-known tech company. CEO Tony Xu wrote in a note to employees that DoorDash sped up hiring during the COVID-19 pandemic to catch up with its growth, since the company was actually undersized as of early 2020. Most of DoorDash’s investments are said to be paying off. However, Xu noted that “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. That’s on me. As a result, operating expenses grew quickly.”
Xu added that DoorDash has “been more resilient than other ecommerce companies.” Third-party data suggests that the company increased its share of the food delivery market to 56 percent of sales as of September. However, DoorDash is still vulnerable to external factors, such as rising interest rates and the threat of a recession.
The company’s growth has slowed and Xu said if DoorDash didn’t cut costs, its operating expenses would outpace its revenue. The layoffs will account for around six percent of DoorDash’s workforce, according to Bloomberg.
DoorDash’s severance package will include 17 weeks of pay along with a February 2023 stock vest for those who are eligible. Health benefits will run through the end of March and COBRA coverage will remain available for up to 18 months. Xu noted that DoorDash will set March 1st as the employment termination date to give immigrant workers who are in the US on visas more time to find another job. Moreover, DoorDash says it will offer recruiting support.
Lyft, another major player in the gig economy space, said earlier this month it would lay off 13 percent (nearly 700) of its employees. Other notable tech companies have conducted mass layoffs in recent months, including Meta, Twitter, Amazon, Roku, Snap, Patreon and Peloton.