In mid-2020, few industries were more hyped than food delivery. But fresh data, focusing on the Gopuff layoffs, shows that even the most seemingly unstoppable startups have struggled to maintain that momentum.

Moneyzine.com can reveal that Gopuff laid off nearly twice as many employees between 2021 and 2023 as Doordash and nearly three times more than Gorillas - all despite huge venture capital backing and the highest per-user revenue in the industry.

Do the Gopuff layoffs mean that the food delivery is coming back down to earth?

With big players like Gopuff, Doordash and Instacart all shedding over 1,000 employees since 2021, it is clear that the food delivery sector as a whole has hit a serious roadblock. Instacart slashed its valuation nearly 40% last year, while DoorDash’s share price fell more than 75%.

To some extent, this was inevitable: Gopuff increased its annual revenue by 70% between 2020 and 2021, but this was the product of successive lockdowns that crippled the hospitality sector and made delivery services uniquely appealing to consumers.

Such growth was not sustainable, and the gains companies like Gopuff saw during that period were more the product of aggressive venture capital investment than business success. In fact, Gopuff actually lost $500 million during 2021 - all despite boasting the highest ‘per-user’ revenue of any company, and earning more than 2x more per user than Instacart.

A future for delivery?

Even if industry layoffs were inevitable, it is striking how differently companies have fared. Gorillas cut nearly 3x fewer jobs than Gopuff and half as many as Instacart. Yet Just Eat sacked half as many employees as Gorillas.

Some of this may simply be a difference in strategic execution. Doordash laid off nearly 15% of its employees in 2021 and has not had to make further cuts, whereas Gopuff’s layoffs have been undertaken in smaller bursts. The company laid off 3% of their workforce in March 2022, followed by a further 10% in July - ultimately losing twice as many workers than its competitor.

But it is also likely a question of winners and losers. Brands desperately raced throughout the pandemic to establish dominance, and that means many will end up losing out - and shedding workers in the process, as the gopuff layoffs clearly signify.

This data suggests the delivery service market has been approached in the wrong manner. Expanding so quickly during the pandemic may have made sense, but a focus on market share over profitability set investors up for a nasty wakeup call - one which may continue to echo throughout 2023.

Jonathan Merry, CEO of Moneyzine.com