Gopuff is laying off 1,500 employees and closing 76 distribution centers over fears of ‘economic turndown’

Gopuff, the Philadelphia-based delivery service that raised more than $1 billion from global investors as customers boosted sales during the pandemic, is shutting or combining 76 distribution centers around the country as it braces “for what could be a much more significant macroeconomic turndown,” officials told investors Tuesday morning.

The company is also reducing its global workforce by 10%, according to a memo shared with employees. Gopuff employs around 15,000 people in the U.S., Canada, and a handful of European countries. Tuesday’s cuts follow hundreds of headquarters and management layoffs at Gopuff earlier this year.

Gopuff is “among the first” of the nation’s fast-growing tech companies “to cut costs” in the current slowdown, and has cash enough to ride out a recession, according to the memo the company sent to investors and employees.

Gopuff and other delivery services reported sharply higher sales in 2020 and 2021 as restaurants shut dining rooms and shoppers shunned grocers and convenience stores in response to COVID-19 concerns and restrictions. As customers returned to restaurants and stores, Gopuff has increased online specials, sales partnerships, and its own brands, to keep revenues rising.

Rivals Uber and DoorDash have lost more than half their stock-market value since Jan. 1, a sign investors worry the two larger — but unprofitable — companies face weak sales growth and are getting further from making any money. As a private company, Gopuff doesn’t have to post its financial results; the company claims it is profitable in major markets on an operating basis, not counting financial costs.

Gopuff has been one of a handful of Philadelphia companies among the Silicon Valley-backed “unicorns” that investors valued over $1 billion. It has sought to apply smartphone-based apps and inventory management software to an old business — delivering food, brand-name goods, and household items — and fuel rapid growth with tech-investor cash. Gopuff was valued at up to $15 billion at its most recent capital-raising last year, and had recruited engineers and managers from across the nation to its Spring Garden Street headquarters in recent years as it prepared for its rapid expansion.

The company did not release a list of the affected locations in advance of notifying workers Tuesday. Gopuff has distribution centers in Northwest, West, South, and Northeast Philadelphia, and in college towns such as West Chester, as well as in hundreds of communities around the U.S. In recent years, the company has hired warehouse managers and workers and contract drivers who work for a stipend and tips, driving their own cars.

Gopuff is planning to cut markets where it does little business, and concentrate on larger communities, in hopes of keeping customer losses to just 5% of its customer base. If successful, that would boost sales per worker, along with profits from operations, according to the memo shared with investors earlier Tuesday.

Gopuff, which was founded in 2013 by then-Drexel University students Yakir Gola and Rafael Ilishayev, says it has proven it can be profitable in local markets. The company keeps 10 cents of every $1 customers spend in its “best-performing” cities, not counting taxes, loan interest and other financial expenses, and is now identifying the most profitable communities, while cutting out the weakest.

The company also expects to focus on its most profitable businesses, which include “instant delivery,” ad sales and product-sampling programs, and the sale of higher-profit “partner” products, such as Apple consumer electronics. It will expand services in the United Kingdom, where Gopuff says it has been especially profitable since acquiring a service there last year.

Gopuff also says it expects smaller delivery services to shut down or sell to larger competitors, reducing competition.

That expectation drew scornful laughter from Victor Tejada, founder of Philadelphia-based Delivery Guys. Tejada says his service, like other locally based competitors, has “strong relationships with solid Philadelphia restaurants” and expects to continue growing as Gopuff and national services such as UberEats and DoorDash struggle to recruit while pleasing their outside investors.

National services have been spoiled by cheap capital, veteran Philadelphia marketing executive Ed Barrett said.

“When they are growing, it’s fine,” said Barrett, chief growth officer at Zuppler, a delivery software company based in Conshohocken. “But even DoorDash loses money,” and, in recessionary times, “I don’t see a way for them to become profitable. It’s the smaller firms, who have been forced to grow without a lot of capital, that become good at managing their expenses. I would bet on them.”

Gopuff’s lead investor is a Japan-based, Saudi-financed venture fund managed by the SoftBank investment group, and it has backing from major Silicon Valley firms such as Accel. The company was considering a multibillion-dollar initial public stock offering (IPO) last year. But the IPO market swiftly dwindled as traders abandoned stocks, especially speculative retail and tech-based companies, following Russia’s attack on Ukraine and this year’s rapid rises in fuel, food, and loan prices.

So the company’s investors will have to wait for their payday: Gopuff has now tightened its belt under the cutback plan, which lays out its strategy “for the next 18-24 months,” according to the memo.

“We built this company focusing on profitability first,” Gopuff added in its statement, saying it expects to continue operating “from a position of strength,” even after shrinking by 1,500 people.