Flipkart's performance-based layoffs putting 1000 jobs at stake isn't surprising

Now, we saw this coming, didn’t we? After the dramatic Jabong acquisition, one of India’s biggest e-commerce site is in the news yet again, but this time for lay offs. If reports are to be believed, Flipkart has asked its under-performing employees to either resign or opt for severance package. With this move, it is ready to layoff about 700 - 1000 employees, three people familiar with the matter told The Economic Times .

While Flipkart is looking for a lean re-organisation, this move shouldn’t come as a surprise considering the recent state of affairs in the startup segment. After enjoying a year of over-valuation, excessive flow of funds, investors have started to worry about returns.

Flipkart has been in a grim mood ever since the company’s app-only strategy backfired, and then took to some major re-organisation in the top-level management. The company also saw some prominent figures exit. The company’s valuation had raised many eyebrows late last year as even established large-cap companies weren’t valued at $16 billion. There has been some reality check these days and Morgan Stanley lowered the company’s valuation to under $10 billion.

What could hurt Flipkart more, is the mark down comes just when arch-rival Amazon India is gaining traction in India. Other investors like Fidelity Investments and T Rowe Price have also marked down the company, which is known to be the pioneer of Indian e-commerce industry. It isn’t just Flipkart, the e-commerce space has been hurt as startups and investors were optimistic about a rapidly expanding middle class quickly latching onto online shopping from street markets, but it hasn’t been the case. The strategy hasn’t worked, and it has only led to doubt about the valuation of every other startup out there. There has been a pattern shift that already begun last year. To name a few, we’ve seen TinyOwl go down the path, Zomato lay offs and the Housing high-drama.

Indian startups have raised $3.5 billion in funding in the first half of 2015. It added about 2,000 startups that have been backed by venture capital/angel investors since 2010, of which 1,005 were created in 2015 alone . This is now changing, as VCs look for profitability and companies that adhere to the newly coined term ‘Çockroach startups’.