Shopify lays off 10% of global staff, nearly 1,000 employees, as CEO admits that bet about skyrocketing pandemic growth 'didn't pay off'
Reuters/Lucas Jackson
- Shopify is laying off about 1,000 people.
- The layoffs come after the company's growth has slowed post-pandemic.
- "It's now clear that bet didn't pay off," CEO Tobi Lütke wrote in a company memo.
Shopify is laying off about 1,000 employees, the Wall Street Journal was first to report Tuesday, citing an internal memo sent by CEO Tobi Lütke.
According to the memo, which Shopify posted to its corporate website, the cuts are being made because Shopify mistakenly believed that the e-commerce bump fueled by the Covid-19 pandemic would continue.
"When the Covid pandemic set in, almost all retail shifted online because of shelter-in-place orders. Demand for Shopify skyrocketed," wrote Lütke.
"Shopify has always been a company that makes the big strategic bets our merchants demand of us — this is how we succeed," he continued. "We bet that the channel mix — the share of dollars that travel through ecommerce rather than physical retail — would permanently leap ahead by 5 or even 10 years. We couldn't know for sure at the time, but we knew that if there was a chance that this was true, we would have to expand the company to match."
"It's now clear that bet didn't pay off," Lütke wrote. "Ultimately, placing this bet was my call to make and I got this wrong."
Recruiting, support, and sales hit hard
Lütke wrote in the memo that most of the layoffs would affect roles in recruiting, support, and sales.
"Across the company we're also eliminating over-specialized and duplicate roles, as well as some groups that were convenient to have but too far removed from building products," he wrote.
He added that affected employees would receive 16 weeks of severance, "plus an additional week for every year of tenure at Shopify."
Shopify saw outsized growth during the pandemic. In 2020, its business essentially doubled, and it reported 57% revenue growth for 2021, up to $4.6 billion. Its gross merchandise volume — or the total value of sales conducted on the platform — grew 47% year over year.
But that trend of explosive growth has since slowed, and its stock has tumbled from its pandemic highs. Since April, the company has laid off about 50 employees, canceled some fall internships, and delayed a compensation overhaul it had planned for all employees. The compensation overhaul was announced after some employees expressed concerns that the total value of their compensation had been hurt by Shopify's plummeting stock price.
Shopify also instituted a 10-for-1 stock split at the end of June in an attempt to boost investor interest in the hard-hit stock.
The company is set to report second-quarter earnings on Wednesday morning.
Shopify is far from the only tech company to conduct layoffs as the global economy has faltered in recent months. According to Crunchbase News, which has been tracking layoffs in tech, more than 30,000 tech workers in the US have been laid off in 2022.
Canada's tech scene is being affected as well — the Canadian fintech darling Wealthsimple recently laid off 159 people, or about 13% of its workforce.
If you're a Shopify employee affected by the layoffs or have a story to tell, contact this reporter at mstone@insider.com or on the secure messaging app Signal at 646-889-2143.
from Business Insider https://www.businessinsider.com/shopify-layoffs-10-percent-ceo-memo-2022-7
No comments