Valued at $15 billion, Gopuff seems to be on the verge of flaming out. The instant delivery service once seemed like the next big thing, the very key to the one-hour delivery craze affecting Silicon Valley. But now, Gopuff is struggling to keep employees and find a new direction amidst restructuring and economic difficulties.
Gopuff made its name by expediently delivering snacks, groceries, alcohol, and more to people. It grew rapidly during the pandemic, where its use of warehouses and prepared inventory allowed Gopuff to satisfy people’s craving for instant delivery.
- The founders started by delivering items to other students while in university.
- Gopuff did well without venture capital support between 2013 and 2016. During that time, it remained cash positive as it served those in the Philadelphia area.
Things changed: While the pandemic saw Gopuff grow to new heights, the sales trend did not last. Not only did 2021 see Gopuff lose access to the funding it needed to continue its rapid growth, but it hemorrhaged around $500 million in cash before one-time expenses. The loss of funds caused many to doubt the company.
- Originally, Gopuff was supposed to raise additional funding in the realm of $1 billion, but investors backed out because of how fast the company lost money during that period.
- The losses forced Gopuff to downsize its workforce with multiple rounds of layoffs. It also entered a hiring freeze, put a halt on new opportunities, and lost executives meant to revamp the company’s ecommerce software.
Gopuff’s struggles continue: Only a few weeks ago, Gopuff informed around 250 employees that their roles were being eliminated. According to the company, they were included in part of the 10% reduction plan meant to take place over the summer. The restructuring announced by the company earlier this year is focused on profitability.
- The customer service team stayed longer than the other employees let go in July “for legal and operational reasons.” However, the company started outsourcing customer service as far back as February.
- Employees were not informed of the planned layoff when the other employees were in July, only receiving the news a week before it happened. They are receiving severance and support during the transition.
Gopuff is not struggling alone: Many instant delivery startups popped up in recent years, from Gopuff to Getir and Fridge No More. Each of them hoped to find a way to get products to customers quickly and make a profit doing so. But outside of the pandemic market, where people desperately wanted things delivered quickly, it has not been a success.
Why does it not work? It is seemingly a bad idea. The only true selling point of near-instant delivery is convenience. In rare cases, it might be useful to others, but it is targeted at populations such as college students, who put convenience over everything, including price. That makes scaling risky for multiple reasons. While exploring other markets might be an option, there are some major issues as it stands.
- Food is perishable. The nature of groceries is that many are perishable, and with instant delivery, they sit in warehouses full of goods. If those perishable goods are not purchased, they rot, and the companies have to eat those costs. And with the unpredictability of consumer demand, food waste is unavoidable.
- Real estate. The warehouses must be close to the delivery zones to allow quick delivery. That is especially expensive in highly-competitive areas.
The human element: These companies are not just a logistics nightmare at scale, but they fail to account for the human element. Many people like to go out, and during the course of their day, it might be more convenient to stop at a grocery store than have things delivered instantly. During the pandemic, people had to isolate themselves, but now that is no longer the case, and it is hurting all delivery startups, not just those providing instant delivery.