The Ottawa e-commerce company’s CEO, Toby Lutke, said in a blog post that most of the staff was affected by the job cuts in recruiting, support and sales. Shopify will also eliminate “over-specialized and duplicative” roles as well as teams that Lutke said were “convenient to have but too far away from building products.” Shopify did not share the total number of employees affected by the cuts, but its most recent management information circular shows it closed 2021 with 10,000 employees and contractors, including 3,000 added last year alone. Ten percent of that total would include 1,000 workers. The company is making the cuts because the COVID-19 pandemic created a surge in demand for Shopify’s software as consumers shifted to making more purchases online, Lutke said. Shopify is betting that the number of purchases people made online instead of at retailers would be five or 10 years ahead of pre-pandemic predictions. “We couldn’t know for sure at the time, but we knew that if there was a chance that was the case, we would have to expand the company to match,” Lutke said. “It is now clear that the gamble did not pay off.” Shopify has recently seen people return to their pre-pandemic shopping habits. While e-commerce is still growing steadily, Lutke said it doesn’t amount to a five-year leap forward, forcing Shopify to make cuts. “Ultimately, making that bet was my call and I got it wrong. Now, we have to adjust,” Lutke said. “Consequently, we have to say goodbye to some of you today, and I am deeply sorry for that.” Incorrect assumptions are largely responsible for Shopify’s antics, Neil Saunders, CEO of GlobalData, said in a note to investors. “In blunt terms, this was a huge strategic mistake due to a lack of understanding of customer behavior, a lack of rigor in market analysis and a bit of hubris,” he said. Shopify isn’t the only one laying off workers, though. In recent months, Wealthsimple, Klarna, Twitter and Netflix have laid off staff as investor euphoria around tech stocks has faded, inflation has soared to a near 40-year high and rumors of a recession have flared. Data collection firm Layoffs.fyi has counted 401 global startups that have laid off a total of 57,552 employees so far this year. Amid a broad market selloff that has weighed heavily on the tech sector, Shopify’s share price has sunk more than 70 percent since the end of 2021, peaking at $2,228.73. At $40.40 on Tuesday morning. Those affected by Tuesday’s layoff will receive 16 weeks of severance pay, plus an additional week for each year of service with Shopify. The company will also remove any equity cliff — a minimum amount of time employees must stay with a company before they start receiving equity. Laid-off employees will have access to career coaching, interview support, resume crafting services, and Shopify will cover some of their online costs during the layoff period. Workers will also be able to keep their home office furniture for which the company gave them an allowance earlier in the pandemic and will give a “start-up allowance” that can be used to buy new laptops. But Shopify needs to do more than cut jobs, Saunders argued. This report by The Canadian Press was first published on July 26, 2022
