Dive Brief:
- Instant delivery firm Gopuff is eliminating 3% of its global workforce of around 15,000 employees, according to reports in Bloomberg and The Information. A spokesperson for Gopuff confirmed the news on Thursday.
- The layoffs are part of an internal "realignment" aimed at improving the company's financial performance, co-founders Rafael Ilishayev and Yakir Gola wrote in a letter to employees that Insider posted. "Our ethos has always been balancing scaling the business with fiscal responsibility and long-term value creation," the letter read.
- The move underscores the difficulty e-commerce and technology firms face in scaling their businesses, especially as investors shy away from the space, and the capital-intensive nature of instant delivery.
Dive Insight:
Gopuff's elimination of hundreds of jobs across its organization, including senior management positions, follows a period of rapid growth that has extended its delivery service across the U.S. and into parts of Europe.
The instant delivery startup founded in 2013 is now a global company that needs to refocus on key objectives, according to the letter posted by Insider, which the publication said was confirmed by the company.
The letter noted that, as part of its realignment, Gopuff is adding a senior vice president of North America, a new role for the company that will oversee business in the region, and that mirrors its international division. In February, Gopuff named former Booking.com executive Bryan Batista as senior vice president of its international business.
"Today, Gopuff is no longer a U.S. business that is expanding internationally. We are a global company with businesses in both North America and Europe," the letter stated. "Our ultimate aspiration is to operate across thousands of cities on multiple continents, and continue to widen how we satisfy instant needs for our customers."
Not stated in the letter is the challenging market conditions tech firms are currently facing and the difficult economics of instant delivery. Companies like DoorDash and Shopify have seen sharp drops in their stock price, and investors are reluctant to plow more money into older startups right now, according to The Information, which first reported the layoffs news.
At the same time as the layoffs, Gopuff is close to closing on $1 billion in new funding, Bloomberg reported. The delivery company raised more than $2 billion last year and reportedly planned to go public later this year, though the current climate will likely make that timeline challenging.
Instant delivery has become popular with consumers during the pandemic, but also notorious for burning through cash. Startups like Buyk and Fridge No More touting delivery in around 15 minutes have recently gone out of business. Meanwhile, the space is also attracting large companies like DoorDash and Instacart, which recently slashed its valuation and announced a raft of retailer services.
Gopuff, currently the leader in instant delivery in the U.S., said in the letter it has "healthy unit economics" and makes $4 in contribution profit per order. It has recently expanded into private label and fresh prepared foods. Gopuff recently began offering products from supermarket chain Morrisons in the U.K. as part of a multi-year deal and could eventually link up with retailers in the U.S. as a way to boost profits.
