Gopuff Slashes Workforce by 10%, Closes Warehouses to Preserve Cash for Operations

    Gopuff, the Philadelphia-based consumer food, and goods delivery company, is cutting about 10% workforce globally and closing dozens of warehouses to rein in expenses amidst a deteriorating global economy.




    The Impact of the layoffs

    The layoffs will affect 1500 warehouse workers and corporate staff in the US, according to a company memo to investors accessed by Bloomberg. This rapid delivery services have slashed jobs twice in four months. It cut 3% of the jobs in March and dropped plans of going public.

    According to a memo, the company also plans to shut down 76 warehouses, about 12% of the total network across the US, to consolidate operations in select cities. These measures are a sharp reversal of the breakneck speed the startup was expanding in the past two years.

    The market value of Gopuff.com was $15 billion in July 2021. It generated around $2 billion in revenue in 2021, jumping 70% compared to 2020. This increase came at a cost as the company built new warehouses. Each location cost $250,000, half of which were launched in 2021. The company expanded too quickly during the pandemic.

    The retrenchment in Gopuff represents the dramatic shift in the sentiments in the rapid delivery segment, where investors had pumped $9.7 billion in 2021 globally. Venture Capital firms are withdrawing from the “growth at all cost” business model, further strengthening the argument that instant commerce in a post-pandemic era is a big question mark for Gopuff and others.

    Gorillas Technology GmbH, a German startup, is exploring selling its business or merging with rivals as it struggles to raise capital. Others like Buyk Corp. and Fridge No More went out of business early this year.

    Gopuff aims to become profitable by 2024 by reducing spending, closing warehouses that are not performing, and focusing on high-margin revenue verticals like advertising. These shifts are as per Gopuff’s original plans to keep profitability as core to every decision, according to CO-CEO Rafael Ilishayev and Yakir Gola.

    Gopuff’s cash balance as of March was $2 billion. The company estimates that by the end of 2022, it will have enough capital to sustain operations for the next four years. It will also save $100 million yearly over the next five years due to a reduction in overhead costs.

    While sales as of May were up by 76% compared to the same period last year, there are concerns that future growth could be affected by a slowing economy and rising inflation. Given the environment, demand may weaken, and the leadership at GoPuff does not expect this level of growth to sustain in the future.

    Gopuff plans to re-evaluate its presence in Spain and France while it intends to double down its operation in the UK to become profitable. The startup launched an ad business last year like delivery peers DoorDash Inc. and Instacart Inc.



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