Reliance axes over 1,000 JioMart employees; more layoffs to follow
What's the story
JioMart, the online wholesale arm of Reliance Industries, has fired over 1,000 employees. The move is part of the company's plan to consolidate JioMart's B2B business.
According to Economic Times, the layoffs are part of a larger round of terminations which will affect around two-thirds of JioMart's 15,000-strong workforce.
Let's take a look at the reasons behind this decision.
Layoff
Company fired 500 executives
JioMart's first round of layoffs has hit employees in various sections. The terminations included 500 executives in its corporate office, sources close to the matter revealed to ET.
In the coming weeks, the company will reportedly fire as many as 9,900 employees, bringing the total number of affected staffers to around 11,000.
It is unclear when the next round will happen.
Information
Hundreds of employees on performance improvement plan
As part of the larger round of layoffs, the company has reportedly put hundreds of employees on a performance improvement plan. It has also put sales employees on a variable pay structure.
METRO
Reliance acquired METRO AG's wholesale business in India
The layoffs at JioMart are closely related to Reliance Retail's acquisition of Germany-based METRO AG's wholesale operations in India.
Last week, METRO announced the completion of the sale of METRO Cash & Carry India for a total consideration of Rs. 2,850 crore to Reliance's retail arm.
The retail giant plans to consolidate METRO's business with JioMart's.
Consolidation
Company wants to prevent overlap of roles
METRO has a permanent workforce of 3,500 employees. According to Reliance, the layoffs are necessary to prevent any overlap of positions.
As part of the deal, Reliance gets METRO's 31 large stores across 21 cities. With the acquisition, Reliance aims to intensify its competition with traditional distributors.
METRO also adds to Reliance Retail's well-established supply chain infrastructure.
Cost-cutting
Reliance wants to reduce JioMart's losses
Reliance's decision to axe JioMart employees also has a cost-cutting angle. JioMart is responsible for starting an aggressive price war in the B2B grocery space with deep discounts and offers.
The company now wants to focus on margins and cutting losses. As part of this, it is also shutting down half of its 150 fulfillment centers.