Why DoorDash Is Laying Off 1,250 Employees

The end of November, just one month from the new year of 2023, has brought some not-so-merry news to more than a thousand DoorDash employees: CEO Tony Xu has announced the layoff of approximately 1,250 corporate employees, the ranks of which grew quickly during the pandemic years to meet demand from merchants and consumers, according to the DoorDash company notice. Pointing out how the pre-pandemic DoorDash was undersized, necessitating a sudden hiring increase, Xu admitted to difficulties in managing team growth, which resulted in oversized operating expenses.

The number of layoffs equates to 6% of total DoorDash workers, which comprises roughly 20,000 employees, according to Reuters. It comes on the heels of a disappointing net loss of $295 million in quarterly revenue reported in early November. In addition, DoorDash company shares fell roughly 64% thus far in 2022, with only small glimmers of resurgence. Contributing factors may be multi-pronged, but the opening of economies after the COVID-19 restrictions have raised concerns about the continued viability of delivery-based companies. A sizable nosedive in delivery demand as people return to a version of normality is only exacerbated by soaring inflationary costs that inhibit spending and drive customer uncertainty, notes Reuters. And it's not just delivery-based app companies struggling to maintain workforces — tech companies have collectively laid off many thousands of employees, including Meta, Netflix, Amazon, Stripe, and Lyft, notes Crunchbase

But there's more to the DoorDash story, as revealed in Xu's address to the remaining 94% of employees. 

How the future of DoorDash will unfold

DoorDash grew in the past years few years not only as a delivery company in existing markets, but it expanded from one business in a single country (America) to five businesses spanning 27 countries, according to the DoorDash notice to employees, posted on its website. Two prongs of the business, identified as Marketplace and Platform, now cater to every category of local retail with a stated mission to empower worldwide local economies and help millions of businesses grow and thrive. Such aspirations require a more targeted focus and a reconsidered tailoring of tactics. This forward-thinking strategy presented by Xu redirects employee hiring strategies, which he reveals will continue but in a rigorously targeted approach. Leaner and more disciplined, creative, and efficient seems to be the future of the DoorDash employee workforce.

So what happens now to the scores of DoorDash employees left in the post-pandemic lurch? Though it's a tough blow in the midst of America's biggest holiday season, Xu lays out a carefully crafted plan to ease the transition. Termination dates begin March 1, 2023 and laid-off workers will receive 17 weeks of compensation, including a month of severance pay and all stock vests through February. Health benefits will continue through March 31 with the option to pay for up to 18 additional months through COBRA. Career transition support will come in the form of an optional directory through which potential employers can recruit departing DoorDash team members.