Oda, the online supermarket delivery startup based in Norway, has announced a significant reduction in its workforce, laying off 150 employees. This move accompanies a strategic shift in the company’s focus, narrowing its operations to its home country and Sweden. This decision comes as Oda aims to achieve profitability in these two markets by next year. The news was confirmed on June 5, 2024, reflecting broader trends in the grocery delivery sector.
The Challenges of Online Grocery Delivery
Oda’s difficulties are not isolated. The online grocery delivery sector has faced substantial hurdles, particularly in achieving sustainable unit economics. Oda, once a promising startup valued at $900 million in a SoftBank-led funding round, has scaled back its international ambitions following a series of setbacks. The company’s previous plans included expansions across the Nordics and northern Europe, but these have now been shelved.
Oda’s retreat is reminiscent of challenges faced by other startups in the sector. In April, Getir, a Turkish startup that raised $2.3 billion, announced layoffs and a retreat to its home market. These companies struggle with the complex logistics of delivering perishable goods in a highly price-sensitive market. As Oda’s CEO Chris Poad noted, even the most capable organizations find it difficult to make online grocery delivery profitable.
Leadership Changes and Strategic Shifts
Chris Poad, who joined Oda in April, replacing co-founder Karl Munthe-Kaas, is spearheading the company’s strategic shift. Poad’s experience at Amazon, Tesco, and Google is seen as crucial to navigating Oda through its current challenges. Munthe-Kaas’s departure followed a board decision amid what Norwegian media described as Oda’s “foreign fiasco.”
Oda’s ambitions were high, buoyed by significant funding and a pandemic-driven boom in online grocery shopping. However, the company faced setbacks, including the closure of its operations in Finland and Germany within a year of their launches. Despite these retreats, Oda consolidated its presence in Sweden through a merger with Mathem, claiming to become the largest online grocery retailer in the Nordics with over NOK 5 billion ($471 million) in revenue.
Financial Realities and Future Prospects
Oda’s layoffs and strategic refocus are indicative of broader market trends. Pre-2022, investor exuberance saw massive valuations for startups, but many have since struggled to meet growth projections. Oda’s valuation has significantly decreased from $900 million in 2021 to $245 million pre-layoffs, as reported by Kinnevik, its largest shareholder.
The layoffs are also a cost-cutting measure likely aimed at firming up Oda’s balance sheet ahead of a potential fundraising round. According to local publication e24, Oda is reportedly raising NOK 600 million ($57 million), with existing backers like Kinnevik, Summa Equity, and Verdane expected to provide most of the funds. The impact of this raise on Oda’s valuation remains to be seen.
Commentary: Navigating a Difficult Market
From my perspective, Oda’s situation underscores the inherent difficulties in the online grocery delivery market. The initial optimism, fueled by significant investments and pandemic-driven demand, has given way to a harsher reality. The logistical complexities and price sensitivity in the grocery sector make it challenging for companies to scale profitably.
Oda’s decision to concentrate on Norway and Sweden appears prudent. Focusing on core markets where the company has a stronger presence and established logistics may enhance its chances of achieving profitability. Additionally, the leadership change with Chris Poad at the helm brings a fresh perspective that could be beneficial in navigating these turbulent times.
In summary, while Oda’s retrenchment and layoffs are unfortunate, they reflect a necessary adjustment to the current economic landscape. The company’s future will hinge on its ability to streamline operations, improve unit economics, and leverage its strengths in its home markets.
