Why Gopuff Is Laying Off 1,500 Employees

E-commerce and food delivery company Gopuff announced that they will layoff 10% of their workforce, per Grocery Dive. They'll also be closing dozens of their physical locations in order to consolidate their operations in an exceedingly more challenging market.

The COVID-19 Pandemic brought online delivery companies into the limelight two years ago. Gopuff was originally founded in 2013 but didn't take off until 2020 when in-person shopping became a health risk for many (via CNBC). According to Philly Voice, Gopuff raised $1.5 billion in funding around the first year of the pandemic and effectively doubled its value in five months. McKinsey notes that the food delivery service market tripled between 2017 and 2021 to more than $150 billion.

Many people are now returning to pre-pandemic lifestyles, and the e-commerce sector has become saturated. This has led to the closures of companies like Buyk and Fridge No More (via Grocery Dive). Investors have been backing out of the instant delivery market recently as well. Bloomberg notes that Gopuff had previously announced it was laying off 3% of their staff for a reorganization back in March. This round of layoffs will remove another 1,500 laborers from their roughly 15,000 person global workforce (via Grocery Dive).

Grocery Dive reports that Gopuff announced the decision to layoff workers in a memo sent out to investors on July 12. Co-founders and Co-CEOs Yakir Gola and Rafael Ilishayev said that the move was meant to streamline their operations. Grocery Dive notes that about 76 of the companies 'dark stores,' which operate as hybrid storefronts and warehouses, will be closing as well (via Vaimo). The memo stated that these decisions were motivated by a difficult business climate.

"In a bull market, we were incentivized to scale our geographic footprint. In assessing the business in light of today's economic environment, we found that we can be more efficient by focusing on maturing our high-performing MFCs to drive profitable growth in each market," read the memo per Grocery Drive.

Gopuff originally stood out among the other online delivery services because their dark stores allowed them to keep their own inventory. This helped them provide quicker delivery times and have more control over the items they sold (via New York Times). Improvements to their inventory management and forecasting technologies are a big part of their reorganization efforts, per Grocery Dive. Gopuff will also be prioritizing markets overseas that have seen recent growth. It notes that Gopuff has seen monthly order growth in the United Kingdom "increase by a factor of ten" since last year.