GoPuff, the 15-minute delivery app servicing Hell’s Kitchen at W42nd and W57th Street, has hit a significant speed bump. The company, started in 2013 by two Drexel grads that had previously generated almost $2 million in revenue, has announced layoffs across all levels of the business, including senior leadership. A memo to staff obtained by Bloomberg noted that GoPuff was moving forward “with a new global business model and corresponding investment priorities.”
While both GoPuff locations in Hell’s Kitchen at W42nd Street between 8th/9th Avenue and W57th Street east of 9th Avenue are still open, passersby noticed that the micro fulfillment centers looked quieter than usual.
15-minute delivery apps, recently under legal scrutiny from city officials including City Council Member Gale Brewer and City Council Member Christopher Marte, have hit a few additional roadblocks, as sanctions from the Russian invasion of Ukraine as well as failed investor deals have stunted the growth of the rapidly booming “dark storefront” industry.
Buyk, one of several services to have appeared seemingly overnight, furloughed 98 percent of its employees before filing for bankruptcy last month after financial sanctions limited access to VC-raised funds in Russian institution Sberbank.
Fridge No More, found citywide as well as locally on W38th Street and 6th Ave, abruptly ceased operations after acquisition talks with delivery service DoorDash fell through. Prior to the closure the company had raised $17 million in a Series A funding round. A representative from DoorDash told Business Insider: “We have a very high bar for deals of various types. As a general rule, we evaluate deals based on several criteria, including the quality of the team, efficient access to new products or markets, and long-term profit potential.If an opportunity doesn’t meet our criteria, we pass on it.” Fridge No More then announced their closure with a somewhat-mystifying, kiwi-themed tweet.
While the company went on to issue a statement citing “growing competition” and other industry related issues, in addition to imposed sanctions due to their Russian financial ties, several sources told Business Insider that Fridge No More struggled with cash flow, failing to pay promotional street teams for weeks on end.
For the delivery brands still open, there may be additional legal complications. Brewer’s team has identified several zoning violations within existing centers, including obstructed windows, not accepting cash sales, and not displaying product pricing per city regulations. In collaboration with civic technology organization BetaNYC, the Council Member has created an interactive map showing some of the city’s fulfillment centers identified for monitoring.
In a letter to the Department of City Planning, the Department of Buildings, and the Department of Consumer and Worker Protection, Brewer and Council Speaker Adrienne Adams outlined the impact of storefronts that do not accept cash sales: “Even if these dark stores are properly categorized as retail establishments, their apparent total reliance on app-based ordering systems may violate Section 20-840 of the Administrative Code, which prohibits retail and food establishments that refuse to accept cash from consumers. The ability of all New Yorkers to access retail goods and services without regard to their ownership of a smartphone or a credit card is an issue of equity that is fundamental to the functioning of our neighborhoods.”
While speed delivery apps gained traction in light of a quarantined populace, the reopening of the city has relieved a pressing need for the service and shone a light on some of the industry’s more unscrupulous business practices. Several officials, including Brewer, have cited the worker safety issues at hand when apps guarantee 15-minute delivery by bicycle, as well as other hazards of super-speedy delivery:
For now, Gorillas, Jokr, Getir, and the aforementioned GoPuff barrel ahead, as both officials and residents keep a watchful eye on their financial and logistical compliance. Some New Yorkers compared the dark store invasion to that of prior chain-store annexations.
Thomas Keller, author of a New Yorker article on the proliferation of chain bank branches across Manhattan’s UWS, told New York Magazine of the dark stores: “I have not felt their presence, but I’ve been alarmed at the concept of them. The banks were billboards masquerading as retail establishments, but these are the opposite, like ‘Nothing to see.’ When Manhattan became like a mall, there was a feeling that outsiders were penetrating the fort. The banks were another iteration of that. Now this. There is this feeling of hollowing.”