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Gopuff scaling back warehouse footprint amid rapid-delivery slowdown

E-commerce company either closing or pausing operations at 22 facilities

Gopuff co-CEO Rafael Ilishayev (Gopuff, iStock)
Gopuff co-CEO Rafael Ilishayev (Gopuff, iStock)

A fast-delivery app is closing or pausing operations at nearly two dozen warehouses in a sign of the sector’s hangover from its pandemic-era boom.

Gopuff is altering its operations at 22 nationwide warehouses to assess how to operate more efficiently, Insider reported. About half of the facilities will be closed, while the other half are being assessed and could be on the chopping block. All of the warehouses were dealing with a low volume of orders.

Gopuff has been down this road before. The company has evaluated warehouse profitability in the past and facilities that aren’t doing enough business, even earlier this year reportedly bailing on plans for new warehouses.

It’s not quite end times for the rapid-delivery app, though. The company still has more than 600 fulfillment centers around the world, more than double the amount it had a year ago. Gopuff also has $2 billion in capital to help weather the tough times.

Times are tough across the industry. Rapid-delivery companies proliferated in major cities during the pandemic, plastering “15 minutes or less” delivery services across billboards and bus stops. The e-commerce boom from the pandemic is beginning to slow, though, and rising interest rates are spooking investors, who want to generate more cash.

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In March, Gopuff laid off 3 percent of its global team, more than 400 people in all. In the last week, competitor Gorillas laid off 300 people, while fellow rival Getir laid off more than 4,000 people, or 14 percent of its workforce.

The industry is also facing increased scrutiny from landlords and politicians, some of whom have soured on the startups. In New York City, the companies reportedly combined to take between 150 and 200 retail spaces over the course of a year, taking advantage of vacant storefronts and sweetened leases to gain a major foothold.

Landlords are pushing back, saying the “dark stores” don’t have much appeal in residential neighborhoods, where they fail to generate foot traffic and bring the noise of delivery vehicles. City Council member Gale Brewer is reportedly considering legislation aimed at these companies, which act as de facto warehouses in retail-zoned areas.

This is a trying moment for fast-delivery apps, but it’s also the first big test for the industrial real estate sector since its pandemic boom. Amazon, one of the largest industrial real estate users in the nation, is looking to sublet 10 million square feet of warehouse space after accumulating an excess amount. It could look to sublet up to 30 million square feet, one source told Bloomberg.

[Insider] — Holden Walter-Warner

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Commercial Real EstateIndustrial Real EstateProptechWarehouses