Two grocery delivery companies, Getir and Gorilla, are forced to pause their plans to expand their services.
Turkey-based company Geitr and Berlin-based firm Gorillas are cutting off almost half of their workforce in search of profits.
Grocery Delivery Companies Laid Off Employees
On May 26, CNBC reported that Gorillas and Getir broke the sad news to their employees.
Another firm called Zapp is also currently working on laying off its redundant employees in its United Kingdom branch.
On May 25, Geitr announced that it would reduce its workforce by 14%. The delivery company has more than 6,000 employees around the world.
Geitr also said in a statement that it would decrease its spending on marketing investments, promotions, and expansion.
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Meanwhile, Gorillas announced that it would be letting go of around 300 employees. The firm defended its decision by citing its need to focus on profitability instead of expansion, according to Reuters.
Aside from laying off its employees, the company is also pulling out from its other branches in Spain, Denmark, Italy, and Belgium. But Gorillas assured its customers in the U.K., U.S., and Germany that the service would stay there.
Gorillas said that these moves are necessary because it will help the firm in the future to become stronger and more profitable. The delivery company shared that it will focus on its brand and customers for now.
Financial Struggles of Delivery Companies
The reason behind the decision pf the companies to lay off their workforce is due to issues in raising funds, according to a Sifted report.
Getir and Gorillas have raised $1.8 billion and $1.3 billion, respectively. In March, Getir was valued at $12 billion, while Gorillas was valued at $3 billion.
The two companies wanted to expand their service in the United States, but unfortunately, they were not financially ready for it and are now facing the consequences.
Getir and Gorillas are not the only ones having problems with their finances. On May 25, a London-based grocery start-up called Zapp said that it is considering making layoffs of up to 10% of its workforce.
However, the company has not revealed its final decision yet, but a consultation is underway with the company's employees in the U.K.
A spokesperson for Zapp said that the current economic climate is challenging for the company because there was hardly any improvement in their sales.
The spokesperson added that the challenging economic climate makes investors back out of deals as they want profits more than growth.
The Zapp spokesperson continued that the start-up needs to raise funds again, which means they need time to adjust their business plan to reduce costs and speed up their path to profitability.
In January, Zapp was able to raise $200 million in funds. This is all thanks to Formula One driver Lewis Hamilton.
Grocery delivery companies enjoyed high demands and seismic growth during the peak of the COVID-19 pandemic.
This is because people are discouraged from going out of their houses, so they use these services instead so they can get their groceries delivered straight to their doorstep.
The sudden increase in layoffs in the delivery industry just shows that there is a shift in investor sentiment toward high-growth tech companies.
A lot of companies have taken extra steps to practice cost-cutting due to the sharp decline of their services in the global stock markets.
On May 22, another company called Klarna announced that it would lay off 10% of its employees after reports that it is seeking a new round of funding that would reduce its valuation by a third.
In 2018, HTC laid off 1,500 of its employees.
In March, Alibaba and Tencent laid off thousands of employees due to a regulatory crackdown.
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Written by Sophie Webster
