Voly slashes operations as startup grocery delivery sector struggles

“[Co-founders] Mark and Thibault had been really open with us the Friday before,” the staffer said. “They said: ‘the changing startup landscape is making it difficult to raise funds, we’re meeting with investors on Tuesday, we’ll let you know how it goes.’ And then on Wednesday we were all let go.”

The staff member said they were aware startups could rapidly turn south, but was “disappointed” because the two Voly founders had previously said the company had enough cash to last until next February. The pair were good people, “super inspirational” and had assembled a talented and collegiate team but needed mentoring, the source said.

Store managers were not given as much notice, the staff member said, with one leaving scathing comments on an online review site.

The company’s Crows Nest, Manly, Maroubra and Alexandria warehouses have closed, the former staff member said, leaving only three or four stores in the city and surrounding suburbs while a planned expansion to Melbourne appears to have been shelved. Delivery times have been extended to up to 20 minutes, but Voly is still operating.

Its larger and better funded rival Milkrun is headed by serial entrepreneur Dany Milham, who did not return requests for comment. In an Australian Financial Review article published last month that branded Milkrun an “overnight success”, Milham insisted his company would be bigger than Coles in a decade and said it had better margins than people assumed because of its efficient staffing and product range.

Elsewhere, Milham has rejected comparisons to other firms in the sector, and there are those in the industry who think Milkrun could benefit from the thinning out of its competition. Send, the third startup that entered the market last year, collapsed in early May. It had tried to sell itself to Milkrun and Voly before it failed, sources said.

It is not unusual for startups to collapse, which the sector sees as a worthwhile price to pay for ambitious people to try to create value for investors, new jobs and fresh customer experiences. Numerous venture capitalists have previously told The Sydney Morning Herald and The Age they still have funds to invest in good companies.

But industry insiders have long been sceptical that any local player would become long-term profitable in the instant grocery delivery sector, which woos customers with cheap prices and superfast service.

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That is because the startups faced high leasing costs from placing stores in dense urban areas, guarantee staff full industry minimum wages unlike competing delivery services such as Uber and DoorDash, and lack the economies of scale that supermarket giants such as Coles, Woolworths and Aldi enjoy.

A European company called Gorillas, which served as a template for the local startups, has been slashing staff and scaling back expansion plans as it holds secret talks with rivals about a sale or merger, according to a recent Bloomberg report. Last year the company raised nearly $US1 billion at a valuation of about $US3 billion but is now struggling to raise money as investors start to doubt the sector’s profitability. US rival Gopuff also laid off hundreds of employees earlier this year.

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