Gopuff, the Philadelphia-based delivery service that raised more than $1 billion from global investors as customers ramped up sales during the pandemic, is closing or combining 76 fulfillment centers across the country as it is bracing “for what could be a much bigger macro pushback,” officials told investors this morning.
The company is also reducing its global workforce by 10%, according to a memo shared with employees. Gopuff employs approximately 15,000 people in the United States, Canada and a handful of European countries. Tuesday’s cuts follow hundreds of layoffs at Gopuff headquarters and management earlier this year.
Gopuff is “among the first” of the nation’s fast-growing tech companies “to cut costs” in the current downturn, and has enough cash to ride out a recession, according to a memo sent to investors by the company.
Rivals Uber and DoorDash have lost more than half their stock market value since Jan. 1, a sign investors fear the two big, unprofitable companies are facing weak sales growth and are moving further and further away for earn money. As a private company, Gopuff does not have to publish its financial results; the company claims to be profitable in major markets on an operational basis, not counting financial costs.
Gopuff was one of the few Philadelphia-based companies among the Silicon Valley-backed “unicorn” companies that sought to apply smartphone apps and inventory management software to a former business – delivering food, produce brands and homewares – and fuel rapid growth with money from tech investors. It was valued at $15 billion when it last raised money last year and had recruited engineers and managers from across the country for its Spring Garden St. headquarters in recent years as it prepared to its rapid expansion.
The company did not release a list of affected sites before notifying workers today. Gopuff has distribution centers in Northwest, West, South, and Northeast Philadelphia, and in college towns such as West Chester as well as hundreds of communities across the United States. In recent years, the company has hired warehouse managers and laborers and contract drivers who work for a stipend and tip, drive their own cars.
Gopuff plans to shrink markets where it does little business and focus on larger communities, hoping to keep customer losses to just 5% of its customer base. If successful, it would increase sales per worker, as well as profits from operations, according to a note shared with investors earlier on Tuesday.
Gopuff, which was founded in 2013 by Yakir Gola and Rafael Ilishayev, then students at Drexel University, says it has proven it can be profitable in local markets. The company keeps 10 cents of every dollar its customers spend in its “best performing” cities, not including taxes, interest on loans and other financial expenses, and now identifies the most profitable communities, while eliminating the most weak. The company also plans to focus on its most profitable businesses, which include “instant delivery”, advertising sales and product sampling programs, as well as the sale of higher-profit “partner” products, such as than Apple consumer electronics. It will also expand its services in the UK, where Gopuff says it has been more profitable since acquiring a service there last year.
The company also says it expects smaller delivery services to close or sell to larger competitors, which will reduce competition. That expectation drew scorn and laughter Victor Tejada, founder of Philadelphia-based DeliveryGuys.com, who says his service, like other local competitors, has “strong relationships with strong Philadelphia restaurants” and s expects to continue to grow as Gopuff and national services. like UberEats and DoorDash are struggling to recruit while pleasing their outside investors.
Gopuff, whose lead investor is a Japan-based, Saudi-backed venture capital fund managed by investment group Softbank, as well as big Silicon Valley companies such as Accel, was considering a initial public offering of shares (IPO) of several billion dollars last year. . But the IPO market quickly declined as traders dumped stocks, especially speculative retail and tech-based companies, following Russia’s attack on Ukraine and the rapidly rising prices for fuel, food and loans this year.
Investors in the company will therefore have to wait for their payday: Gopuff has now tightened its belt under the reduction plan, which outlines its strategy “for the next 18 to 24 months”, according to the memo sent by the company to investors.
“We’ve built this business by focusing on profitability first,” the company added in its statement, and expects to continue operating “from a position of strength” even after shrinking 1,500 people.