Fears of an impending recession are forcing fast-food delivery companies to slow growth.
This week, two of the largest instant grocery apps, Getir and Gorillas, announced decisions to lay off hundreds of employees. Another company, Zapp, said it is proposing layoffs to its UK team.
Getir told staff on Wednesday that he plans to reduce his overall workforce by 14%. The Turkish company employs more than 6,000 people worldwide, according to LinkedIn.
“With a heavy heart, today we shared with our team the sad and difficult decision to downsize our global organization,” the firm said in an emailed statement.
“We will also reduce spending on investments in marketing, promotions and expansion.”
Gorillas said Tuesday it was making the “extremely difficult decision” to lay off about 300 of its employees, citing the need to reach long-term profitability.
The Berlin-based company is also evaluating a possible exit from Italy, Spain, Denmark and Belgium, among other “strategic options”, as it shifts the focus to more profitable markets such as the US, UK and Germany. .
“These are necessary moves that will help Gorillas become a stronger and more profitable business with a stronger focus on their customers and their brand,” Gorillas said in a statement.
According to a Sifted report, Gorillas has been struggling to secure additional funding. The company was not immediately available for comment when CNBC contacted it.
Getir and Gorillas have raised $ 1.8 billion and $ 1.3 billion so far, respectively. Getir was valued at $ 12 billion in March, while Gorillas was last valued at $ 3 billion. Both companies have spent significant amounts of cash to expand in the US
London-based grocery start-up Zapp confirmed on Wednesday that it is considering firing up to 10% of its staff. A final decision has not yet been made, as a consultation with company employees in the UK is underway.
“The current macroeconomic climate has become incredibly challenging, with very little visibility into when things will improve. This uncertainty is causing investors to significantly reduce their risk appetite, favoring profitability over growth,” said a spokesman for the company.
“As a corporate-backed escalator that will have to raise funds again in the future, we need to adjust our business plan to reduce costs and accelerate our path to profitability.”
Zapp raised $ 200 million in a January round of funding. The investment was supported by Formula 1 driver Lewis Hamilton.
Companies such as Getir and Gorillas experienced seismic growth during the coronavirus pandemic. Operating from small stores known as “dark shops”, these services promise to deliver items to buyers’ doors in as little as 10 minutes.
The recent series of layoffs in the sector highlights a broader shift in investor sentiment towards high-growth technology companies, many of which have recently taken steps to reduce costs in the context of a sharp drop. of global stock markets. Earlier this week, buy now, pay later, the company Klarna said it would lay off about 10% of staff after reports that the company was looking for a new round of funding that would reduce its valuation by a third.
Instant grocery delivery services have long faced questions about the viability of their business models, which tend to sell essential goods at a higher price than supermarkets while relying on offering generous discounts to attract new users. Now, with Covid restrictions largely disappearing around the world and prices rising, the future is becoming uncertain for space.
In March, Gopuff said it would cut about 3 percent of its overall workforce as part of a restructuring plan.
Meanwhile, New York startups Fridge No More and Buyk, which raised money from Russian investors, ended their operations after facing fundraising problems following the Russian invasion of Ukraine.
“Fast food delivery companies live and die based on the amount of capital they raise,” Brittain Ladd, an ecommerce consultant, told CNBC.
“The problem with players like Getir and Gorillas is that they are trick companies,” he added, referring to the platform’s promise of 10-minute deadlines.
Getir’s CEO has previously said that his company “democratized the right to laziness.”
Grocery and food delivery platforms on demand have already experienced considerable consolidation last year, with Getir buying the British start-up Weezy, Delivery Hero of Germany acquiring a majority stake in the Spanish food delivery company Glovo and DoorDash acquiring the Finnish Wolt.
Earlier this month, London-based grocery store Jiffy said it would stop making deliveries and instead shift its focus to picking groceries in person, to try to convince investors that it can achieve profitability. Since then, the company has announced plans to resume deliveries through an agreement with Zapp.