German delivery service Gorillas cuts 300 jobs
German shopping delivery app Gorillas will lay off 300 workers – a move that halves its administrative staff – as the company moves from expansion to profitability, its CEO said.
In an interview with Reuters on Tuesday May 24, the managing director Kagan-Sumer said the company had tripled in size since October, when it raised $921 million, but was not profitable.
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“Risk has become irritating for investors, and no one wants uncertainty right now. This makes it quite difficult to raise funds at the moment,” said Sumer. “When we go public, we want to do so as a profitable business.”
Grocery fast delivery services are high-cost businesses, Reuters noted, because companies must pay thousands of couriers and logistics centers to quickly get products to consumers’ doorsteps.
“That’s why fixed costs need to come down and the Berlin headquarters needs to become the hub,” Sumer said, adding that Gorillas’ job cuts would only affect administrative staff and not its 14,000 bike delivery workers.
He said Gorillas wanted to focus on Germany, France, Britain, the Netherlands and the United States, which make up 90% of the company’s business, and was looking at options for smaller operations in Belgium, Denmark, Spain and Italy.
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The gorillas are not alone in their struggle. Last month, instant delivery platform Gopuff said it was trying to raise $1 billion in debt that could be turned into equity while cutting the minimum wage for drivers in California.
The move follows two rounds of layoffs this year, including one in March when it laid off around 450 people, or 3% of its 15,000 workers. Also in March, Instacart reduced its valuation from $39 billion to $24 billion. Companies like DoorDash, Grubhub and other delivery services have struggled to find ground as public companies.
Experts said the industry could expect to see consolidation in its future.
“I think as ultra-fast grocery starts to mature, we’ll see a shake-up,” james walker, CEO of superfast delivery service Buyk, told PYMNTS in January. “Players who are very focused on the business model as well as the customer experience will ultimately succeed, and those who don’t spend the required time won’t be as successful.”