The pullback from the Philadelphia-based startup also underscores the dramatic shift in sentiment in the fast delivery industry, in which investors invested $9.7 billion globally in 2021. VCs moving away from the model of “ growth at all costs,” proving that the instant commerce economy can work in a post-pandemic world is a looming issue for Gopuff and its competitors. German startup Gorillas Technologies GmbH is exploring options for selling its business or merging with rivals as it strives to raise capital, while Fridge No More and Buyk Corp. ceased operations earlier this year.
Through cutting expenses, eliminating underperforming warehouses, and focusing on higher-margin revenue streams like advertising, Gopuff aims to be profitable by 2024.
“These changes not only accelerate our timeline to profitability, they bring us back to our roots of keeping profitability at the heart of every decision,” Gopuff co-CEOs Yakir Gola and Rafael Ilishayev wrote in the letter.
Across its warehouse network, Gopuff generates an average of 88 cents in earnings before interest, taxes, depreciation and amortization, per order, with former locations earning as much as $3, according to an internal investor presentation seen by Bloomberg. . A location typically becomes Ebitda positive after six months, according to Gopuff estimates, and begins generating over a dollar in revenue after 18 months. However, a large portion of these warehouses are still less than a year old. Gopuff argues that by using the cash freed up on newer but high-performing warehouses, it can speed up the time it takes them to turn a profit because orders are spread across fewer installations.
One market in which Gopuff expanded too quickly was New York, Ilishayev said in an interview. “It’s the volume you siphon from building to building because you haven’t achieved economies of scale. If you have one building instead of two, you can achieve profitability faster,” he said. Gopuff will close five of its 24 warehouses in New York.