Following up on a big round of layoffs earlier this week, Zomato said it is shutting down its cashless payments system — a feature that it had trialled in the Middle East since the beginning of this year.
The service, which allows customers to seamlessly pay for their food after adding their credit card — as the name indicates — had been trialled in Dubai since February 2015. But, after looking at that test deployment in more detail, Zomato has decided it will be “rolling back” the service, and therefore not extending it to other markets worldwide, for a number of reasons.
Writing in a blog post, Zomato CEO Deepinder Goyal explained the main reasons behind the move. Cashless payments didn’t become a part of the natural user flow, most of its users were early adopters, and the cost of educating restaurant staff to use it was too high versus the results, he said. Furthermore, since Zomato took the step of providing (paying for) iPads at each restaurant in order to process payments on the merchant side, thus it found that the customer acquisition cost was too high.
Speaking to TechCrunch last year, Zomato co-founder and COO Pankaj Chaddah said payments was about moving up the value chain in the dining experience, and that it could have lead to loyal programs and other new revenue generating opportunities.
Ultimately, though, the Dubai trial showed fundamental issues.
“We had to lure the user to think differently –- this was the most difficult part. In our Cashless product, we needed a user to think about the payment at a restaurant before the start of the meal, whereas they are accustomed to thinking about the payment only at the end of the meal,” Goyal wrote on the company blog.
Zomato’s Cashless product offered its users a way to pay for a tab essentially as soon as sitting down at a table. There are a couple obvious advantages here: it gives restaurant goers a way to be able to pay for their check without having to wait for a waiter, and leave on their own schedule. But apparently the product was difficult enough to run that it wasn’t quite ready for the market.
TechCrunch reported on Friday that Zomato was laying off 300 of its employees, or about 10 percent of its workforce of 3,000. The cuts were a result of cutting costs in weaker parts of the company’s business. The layoffs were described to TechCrunch as global and affecting all markets, but would be concentrated in regions where more staff members are focused on collecting content.
Zomato has raised more than $223 million from investors to date and is valued at more than $1 billion. Its business isn’t profitable, and it seems that these recent cuts and refocusing is aimed at remedying that and cutting down its burn rate.
Goyal confirmed that the company will realign the teams working on Cashless to other businesses, rather than add to those aforementioned layoffs. Zomato plans to bring Cashless back to Dubai — and potentially other markets — in tine, “once we have the ecosystem in place to counter the above challenges,” the company said in a statement. If it gets a great enough penetration, it won’t have to install any additional hardware at a restaurant, Goyal further explained in the blog post.
“We’d like to say a big thank-you to everyone involved in this first chapter of Zomato Cashless,” he concluded. “We are confident that Cashless 2.0 will be a stronger, more sustainable product and business, and one we’re looking forward to rolling out.”
Zomato initially made its name as a food discovery network akin to a Yelp for restaurants in India. It has expanded globally and branched out from that basic service by offering cashless payments and food delivery in its native India, it has a whitelabel service for restaurants, and there are plans to introduce a table booking service, too. The company raised $50 million in August with the goal of expanding its new business verticals into more markets — while it is preparing to bring its food delivery service and table ordering to new countries, cashless payments is one area where it is pulling back for now.