An employee works at Shopify’s headquarters in Ottawa, Ontario, Canada.
Chris Wattie | Reuters
Shopify is laying off roughly 1,000 workers, or about 10% of its global workforce, the company announced Tuesday.
Shares of Shopify sank more than 16% after the announcement.
In a memo to staff, CEO Tobi Lutke acknowledged that he had misjudged how long the pandemic-fueled e-commerce boom would last, and amid a broader pullback in online spending, Shopify was dying to reduce a number of functions.
Shopify had more than 10,000 employees in the fiscal year ending Dec. 31, 2021, according to a securities filing.
The cuts will affect all divisions of Shopify, though most will be in hiring, support and sales, and “across the company” it is eliminating “over-specialized and duplicated roles, as well as some groups that were convenient have but too much. away from building products,” Lutke said in the note.
Tech companies have been announcing layoffs, hiring freezes and rescinding job offers amid economic uncertainty and declining pandemic trends. Earlier this month, Google parent Alphabet and Facebook owner Meta said it would slow its hiring pace. Companies like Netflix and Coinbase have announced layoffs.
The Canadian company, which makes tools for businesses to sell products online, was one of the biggest beneficiaries of the pandemic-driven e-commerce boom. As stores reopened and consumers returned to pre-pandemic shopping habits, Shopify and other companies in the e-commerce sector began to grapple with concerns that they would not be able to sustain the high-flying growth they were to enjoy.
Shopify bet that the growing mix of online spending versus in-store commerce would “permanently move forward by 5 or even 10 years,” Lutke said. It added staff to meet what it predicted would be a sustained shift in e-commerce, more than doubling its employee base since the end of 2019, the company said in February.
“It’s clear now that the gamble didn’t pay off,” Lutke said. “What we see now is that the mix is back to roughly where the pre-Covid-1 data would have suggested it should be at this point. It’s still growing steadily, but it wasn’t a significant 5-year jump.”
In its most recent earnings report, Shopify forecast lower revenue growth in the first half of the year as it navigates tough pandemic-era comparisons. The company plans to report second-quarter earnings on Wednesday.
Shopify said the laid-off employees will receive 16 weeks of severance pay, plus one week for each year of service with the company.