“Neither sustainable nor pro-social… They fire staff as quickly as they promise to deliver groceries,” that was the verdict of Berlin’s Senator for Integration, Work und Social Affairs, Katja Kipping (Die Linke), in response to Gorillas firing more than 300 admin workers last Tuesday.
This delivery company has attracted a lot of criticism in recent months. First, riders went on strike after several colleagues were unfairly dismissed, which led to workers attempting to form a workers council, or Betriebsrat. In order to sabotage this attempt to organise, management engaged in a number of underhand manoeuvres like offering free beer to lure riders away from a general meeting, and even dressing up as riders to infiltrate the picket line.
After all that, it still looks like Gorillas might become an endangered species. These layoffs follow information leaked to TechCrunch stating that Gorillas haemorrhages $50-75 million a month. With “only” $300 million left in the bank, they might be running out of time.
Exberliner got hold of an internal email sent from company co-founder Kagan Sümer in which he sought to explain “why and how we are taking this decision”. It read:
“…in March, the markets turned upside down, and since then the situation has continued to worsen. Very rapidly, greed in the markets was replaced with cautiousness. And tech companies, especially low or negative margin tech companies are facing a very strong headwind.
The result of this new reality is that wealth and money are being transferred to low-risk profitable businesses.”
For “low or negative margin” companies, read: companies who do not make any money.
Now Gorillas have decided to change course. Instead of pursuing hyper growth, they will try to find a “clear path to profitability.” This means exiting Italy, Spain, Denmark and Belgium, and concentrating on Germany, the Netherlands, the UK, France and the US where, combined, they make 90 percent of their profits.
Gorillas haemorrhages €50-75 million a month. With “only” $300 million left in the bank, they might be running out of time.
Kagan says that the company predicted the need for downsizing over nine months ago. Still, he only told workers they were fired this week. This fits into a pattern of behaviour from Gorillas, who have cemented the reputation they gained through union-busting practices by providing unsafe working conditions, paying employees late, and deliberately structuring the company to avoid workers organising.
Back in October, Gorillas split their company into two parts: a logistical part consisting of the warehouses and riders and a backend part, the original “Gorillas Technologies” company.
The effect was that the newly formed Betriebsrat didn’t apply to the administrators at Gorillas HQ, where layoffs have just been carried out. Gorillas then went further, restructuring individual warehouses into franchises, no longer belonging to the larger corporation. This meant any employee who was employed at a newly minted franchise was ineligible to join the workers council.
The reason behind this was the same as it has always been. Investors are reluctant to invest in a company, especially a start-up, where workers have formed a council. With a bearish market in sight, Kagan seems to want to trim the fat.
During the last round of funding, Gorillas estimated its own value at five billion euros. Since then they’ve fallen well short of their targets. Rival delivery service Flink has taken over a large portion of market share in Berlin, using the same software purchased from a Lebanese company.
Kagan himself said in the leaked email…
“In January 2020 there were 30 players in our industry.
In January 2021 only 15 remained
In January 2022 you can count 4
And now the stage of the final 4 begins, where one year from now there will be only 1-2 players remaining.”
He might be right about that. But the chance of Gorillas making it that far appears to be open to question.