The “on-demand delivery” business model which was attracting huge amounts of investment is suddenly no longer popular.
Michael Moritz, chairman of Sequoia Capital and one of the most successful venture capitalists in history, said the “on-demand” model made a lot of sense. It was a huge trend enabled by smartphones and he invested about nine billion into it.
But in the last half of this year that money stalled completely. Several prominent Silicon Valley venture capitalists are now saying that many delivery start-ups could fail, leaving investors with big losses.
Delivery start-ups continue to grapple with fierce competition, thin margins and a host of operating challenges that have defied easy solutions or economies of scale. This has resulted in widespread discounting and artificially low consumer prices have made on-demand delivery.
There have been a few high-profile failures, including US meal delivery firm SpoonRocket, which went down in March, and PepperTap, an Indian grocery delivery service backed by Sequoia that folded in April.
Some think that the only thing which could transform the sector are driverless vehicles and sidewalk robots. However, that remains far from a practical reality, leaving many start-ups with no clear path to innovate their way to profitability anytime soon.
Machines could take the jobs of nearly 700 Morrisons back office staff.
The supermarket, which employs around 131,000 staff and has 490 UK stores, has reportedly embarked in four week consultation talks with with 689 cash office managers after looking at the machines to cut costs.
It follows the company posting a loss of £879 million in 2012, which was a drop of seven percent.
Last month it also announced that it had seen a pretax profit drop to £901 million in February this year compared to the £935 million made in 2011.
Over the past few months the company has been making changes in a bid to compete with its supermarket rivals.
In March it announced it would be moving into the online grocery delivering space. It is also planning to build up its army of 12 convenience stores, and snapping up 62 sites from the administrators of Jessops, HMV and Blockbuster.
The supermarket claimed that using the new robots would speed up the cash counting process. It said it would continue to support those potentially affected throughout this consultation process.”
TNT Express has said it will be driving away around 4000 staff within the next three years as it struggles to get back on its feet.
In a strategic memo released today, the Dutch delivery group, which was the target of a failed $7 billion takeover by United Parcel Service, has said the cuts, which will affect around six percent of its workforce, will save it around $287 million (€220 million) by 2015.
The company added that it would also be restructuring the business, which it hoped would knock another $195 million (€150 million) by 2015.
The plans fall under the company’s “Deliver” strategy, which aims to help it turn its business around and rake in profits by 2015. Currently the company is failing on the money front, as a result of “challenging trading conditions and continuing price pressure”.
As well as the cuts and restructuring, the company has also said it will focus around reshaping the TNT portfolio through the sale of China and Brazil Domestic and reducing exposure to fixed intercontinental air capacity. It will also look at focusing on TNT Express’ distinctive service proposition and increasing growth in its most profitable segments and invest in infrastructure and in business supporting and customer IT.
Commenting on the Deliver programme, Bernard Bot, interim CEO said the business faced difficult market conditions and strategic challenges. However he pointed out it had a “unique competitive proposition” – an unrivalled European network, worldwide connections, an integrated range of services and recognised dedication to customers.
However, he warned the strategy had to be executed correctly to ensure results.