Fears of an impending recession are forcing fast food companies to rein in growth. This week, two of the biggest instant grocery apps, Getir and Gorillas, announced decisions to lay off hundreds of employees. Another company, Zapp, said it was proposing layoffs on its UK team.
Getir told employees on Wednesday that it plans to cut its global staffing number by 14%. The Turkish company employs more than 6,000 people worldwide, according to LinkedIn.
“It is with a heavy heart that we today share with our team the sad and difficult decision to downsize our global organization. We will reduce spending on investments in marketing, merchandising and expansion,” the company said in an emailed statement.
On Tuesday, Gorillas said it was making a “very difficult decision” to lay off about 300 of its employees, citing the need to turn a long-term profit.
The Berlin-based company is considering a possible exit from Italy, Spain, Denmark and Belgium, among other “strategic options”, as focus has shifted to more profitable markets such as the US, UK and Germany.
“These are necessary steps that will help Gorillas become a stronger and more profitable company with a strong focus on its customers and its brand,” Gorillas said in a statement. According to a report by Sifted, Gorillas has struggled to obtain additional funding. The company was not immediately available for comment when contacted by CNBC.
Fast delivery: Mashhad
Getir and Gorillas have raised $1.8 billion and $1.3 billion to date, respectively. Getir was valued at $12 billion in March, while Gorillas was last valued at $3 billion. Both companies burned large amounts of cash to expand into the United States
London supermarket startup Zapp on Wednesday confirmed reports that it is considering laying off up to 10% of staff. A final decision has not yet been made as consultations are ongoing with the company’s UK staff.
“The current macroeconomic climate has become incredibly challenging, with very little vision of when things will improve. This uncertainty is causing investors to significantly reduce their appetite for risk, preferring profitability over growth,” a company spokesperson said.
“As a project-backed expansion that will need to raise funds again in the future, we need to adjust our business plan to reduce costs and accelerate our path toward profitability.”
Zapp raised $200 million in a funding round in January. The investment was backed by Formula 1 driver Lewis Hamilton.
Express delivery companies like Getir and Gorillas have seen seismic growth during the coronavirus pandemic. Operating from small warehouses known as “dark shops,” these services promise to deliver items to shoppers’ doors in less than 10 minutes.
The recent string of layoffs in the express delivery sector highlights a broader shift in investor sentiment toward high-growth technology companies, many of which have taken steps to cut costs recently amid a sharp downturn in global stock markets. Earlier this week the company, buy now, pay later, Klarna said it would lay off about 10% of employees after reports that the company was seeking a new round of funding that would cut its valuation by a third.
Supermarket delivery services have long faced questions about the viability of their business models, which tend to sell basic products at higher prices to supermarkets, while relying on generous discounts to attract new users. Now, with Covid restrictions largely gone worldwide and prices soaring, the future is uncertain for the space.
In March, Jobov said it would cut its global workforce by 3% as part of a restructuring plan.
Meanwhile, New York startups Fridge No More and Buyk — which raised money from Russian investors — have closed after facing fundraising problems in the wake of Russia’s invasion of Ukraine.
“Fast grocery delivery companies live and die based on how much capital they raise,” Britten Ladd, an e-commerce consultant for CNBC, told CNBC.
“The problem with players like Getir and Gorillas is that they are deceptive companies,” he added, noting that the platforms promised 10-minute delivery times.
Getir’s CEO previously said his company is “democratizing the right to laziness.”
On-demand food and grocery delivery platforms have seen a major consolidation in the past year, with Getir buying British start-up Weezy, Germany’s Delivery Hero acquiring a majority stake in Spanish food delivery company Glovo and DoorDash acquiring Finnish company Wolt.
Earlier this month, London-based grocer Jiffy said it would stop making deliveries and instead shift its focus to personal groceries in a bid to convince investors of the potential for profit. The company has since announced plans to resume deliveries through a deal with Zapp.
Read also: Express delivery in e-commerce as a priority
source: CNBC
