GoPuff has said its rivals in the rapid delivery sector face mass extinction over the next year, as the app hones in on accelerating UK market share.
The Philadelphia-based firm, which was valued at $15bn last summer, has previously said it intends to amp up its focus on the UK as it departs Spain, in an endeavour to close in on profitability.
The “majority, if not all” of the firm’s direct competitors “won’t be in existence in the next six-12 months, Dan Folkman, GoPuff’s senior vice president, told CityA.M. yesterday.
The firm launched in the UK last year by snapping up rivals Dija and Fancy, which Folkman described as “an overnight solution” for the US firm to make the tricky transition into the European market.
However, the firm now views M&A opportunities of direct rivals as “not worth the price being asked,” due to an “evolving” competitive landscape.
“It would be silly of us to deploy any capital in the space,” he added, although suggested the company would be eager to pursue M&A opportunities of “market adjacent” businesses.
It comes as GoPuff slashed its headcount by 10 per cent in July and shuttered dozens of warehouses, with rivals Getir and Zapp also reducing staff by 14 and 10 per cent respectively.
Slashing jobs was “not easy stuff,” Folkman said, but cost cutting initiatives had been necessary “to navigate a new and unpredictable environment.”
After an explosion of apps and billion-dollar valuations a couple of years ago, Folkman said many rivals had not focused enough on investing in their technology and infrastructure.
“When money grows on trees, there’s an opportunity to do anything,” he said. However, when profit becomes “the pure focus […] if you don’t have a structurally sound core business, it is going to be very hard to endure especially when you have astronomical cash deployment rates,” he added.
Folkman was sceptical of the longevity of brands that merely connected couriers to grocery stores, compared to GoPuff’s network of fulfilment stores and own brand products.
While there were “maybe 30 instant commerce players” across the US and Europe two years ago, there were now just around four, Folkman said. “We expect that number to dwindle,” he added.
“We’ve made a lot of progress so far in 10/11 months,” Folkman said of the UK expansion, forecasting an acceleration of market share over the next year, “based on the fact the competition landscape has changed and that we are a value based option for consumers.”
After a slew of tech firms have floundered after making debuts on the London Stock Exchange in the past year, it comes as no surprise that an IPO is “not the conversation” GoPuff is currently having.
“Future aspirations we can talk about in the future,” Folkman said.
“We have implemented a self-funded business plan that gets us to profitability, we are well capitalised, we don’t want to rely on outside capital,” Folkman said. “That doesn’t mean we will never take outside capital, it’s just for now we want to focus on self-funding our business.”
This approach was “the prudent thing” for the company, “given it’s unlikely the capital markets are going to be amenable to growth companies for quite some time.”
After operating only in “one of the greatest bull markets for the past decade plus,” with GoPuff founded in 2013 when growth was accelerating for tech firms, the company’s biggest challenge in the year ahead would be “a mindset shift” necessitated by the macroeconomic environment.
“The challenging thing about an environment like this is no one knows when it is going to end, and so that lack of light at the end of the tunnel is probably the biggest challenge,” he said.