Is the sugar rush over for cash-guzzling fast grocery delivery services? Late last month, two of the biggest grocery delivery apps, Getir and Gorillas, announced plans to lay off hundreds of their employees.
UK-based Zapp said it was also considering nationwide layoffs, while Berlin-based Flink also slowed hiring.
The instant grocery delivery app industry has boomed exponentially during the COVID-19 pandemic, with lockdowns and fear of catching coronavirus keeping people indoors.
Investors poured billions into these companies, which promised fast delivery of groceries from small distribution centers known as dark stores.
But the cost-of-living crisis as well as war-induced supply shortages in Ukraine are forcing industry leaders to reconsider their options as outside investment dries up.
Here are some of the instant delivery startups currently laying off couriers, and why it matters.
Downsizing of Getir
Turkish company Getir, which employs more than 6,000 people worldwide according to LinkedIn, announced to its staff on May 25 that it plans to cut its global workforce by 14%.
In a statement emailed to employees, the company said, “With heavy hearts, we shared with our team today the sad and difficult decision to downsize our global organization.”
“We will also reduce spending on marketing capital, promotions and expansion,” he said.
A spokesperson for the company told Euronews Next that the downsizing will vary by country, without giving further details but adding: “We do not take these decisions lightly.”
“It is one of the most difficult days since we founded Getir as we had to make difficult decisions regarding our staff organization which will negatively affect some members of our team,” the spokesperson said.
Gorillas: focus on profitability
Getir’s main rival, Berlin-based Gorillas, also announced on May 24 that it was laying off 300 of its employees. The “extremely difficult decision” was due to a need to achieve long-term profitability, he said in a statement.
The company has hinted that it is also evaluating the possibility of withdrawing its operations from a number of selected countries – including Spain, Denmark and Belgium – in order to focus on more profitable markets in the UK. , the United States and Germany.
Gorillas said these were “necessary moves” to help the company “become a stronger, more profitable business” with “more precise focus”.
Zapp: “Very little visibility”
Another London-based grocery start-up, Zapp, confirmed on May 25 that it was considering laying off 10% of its staff, saying that “the macroeconomic climate has become incredibly difficult, with very little visibility on the when things will get better.”
A final decision has yet to be made, with ongoing consultation with UK-based employees.
Zapp did not respond to a request for comment.
The recent turn towards layoffs at companies in the sector highlights a change in investor sentiment towards high-growth tech companies.
Technology as a whole is in decline amid a sharp drop in global stock markets after a remarkable bull run that peaked earlier this year.
High inflation, coupled with the end of COVID-19-related lockdowns and war-exacerbated supply chain issues in Ukraine, is impacting the sector — and hitting fast grocery delivery businesses particularly hard.
Many have been largely backed by venture capital and, despite booming over the past two years, have had an uncertain path to profitability.
Like other such companies in Europe, Gorillas quickly caught the attention of investors – raising $1.3 billion (€1.21 billion) in venture funding from Tencent, DST Global, Coatue and Delivery Hero.
However, according to a Sifted reporta news site backed by the Financial Times, the company has struggled to raise additional funding.
“If private market capital is no longer willing to support the business model, then a company must rely on its own cash-generating capacity,” said Citi analyst Monique Pollard.
Business models scrutinized
Despite the apparent difficulties these companies are currently facing, some investors say there is still a strong business case for on-demand groceries.
Larry Illg, managing director of online food businesses at tech investor Prosus NV, said what’s happening now will benefit businesses that survive.
“We’re seeing slower rollouts of new dark stores, lower levels of marketing investment, and lower competition discounts,” he said.
“So overall growth is slowing, but the space economy is healthier.”
Illg, in a presentation to investors earlier this year, said he sees the lines blurring between restaurant food delivery, grocery delivery and fast-paced commerce.
“I think you’re going to see different variations of this around the world, across the different inventory mixes and business models,” he said.
Sajal Srivastava, co-founder of TriplePoint Capital, a Silicon Valley company that provides debt financing to startups, agreed.
He said there was no single business model for food delivery, but that a combination of hot meal delivery, neighborhood delivery and slower grocery delivery would work in every country over time. time.
“So each country will have several players, but do they need six? Probably not. Do they need two or three? Yes, and I think that’s where it will come out.”
A push by big, well-known meal delivery companies like Deliveroo, Just Eat Takeaway and Uber Eats into the grocery space is already underway, as these companies strike delivery deals with convenience stores and grocery chains. grocery.
Some partner with existing delivery companies. The American company DoorDash finalized last week its acquisition for 3.5 billion dollars (3.25 billion euros) of the Finnish Wolt, a company of delivery of meals and fast trade.
Germany’s Delivery Hero has also agreed to take a majority stake in Spain’s Glovo as part of a deal valuing the company at $2.6 billion (€2.4 billion) which is expected to close later. late this year. Both have quick grocery operations.
Other delivery companies have strengthened through acquisitions within the industry, with Flink buying French Cajoo for an undisclosed sum last month.
“Delivery workers need protection”
So what does this industry shake-up mean for delivery people – those rushing to get groceries packed up and delivered to homes in minutes?
An anonymous delivery driver from Getir told Euronews that he and his colleagues were “worried about the latest news and where the industry is headed”.
He’s clearly not the only one.
The App Drivers and Couriers Union (ADCU) provides legal and financial support to workers in industry who are facing redundancy in the UK.
Fast food companies should bear in mind that “many people employed by these companies are the main source of income from them”, Yaseen Aslam, chairman of the ADCU, told Euronews Next.
“[Courier drivers are] mainly migrant workers, from a minority community – they really need protection,” he said.
“The cost of living is rising – workers need job security; they need sick pay; they need pensions. It is incredibly important”.