- Shopify announced Thursday that it was cutting 20% of staff and selling off its logistics business.
- Over the last few days, impending layoffs have created a culture of fear among employees.
Shopify CEO Tobi Lütke announced Thursday that the company would cut 20% of its workforce and sell most of its logistics business to the supply-chain technology company Flexport.
In a note to employees and shareholders, Lütke said: "I recognize the crushing impact this decision has on some of you, and did not make this decision lightly."
He continued: "This is a consequential and hard week. It's the right thing for Shopify but it negatively affects many team members who we admire and love working with.
"This is one of those times where both right and hard are true at the same time. My belief is that any enduring company makes a habit of doing the right thing, even if easy outs present themselves. Yet it doesn't get easier to make a decision like this, and I hope it never does," he added.
The company did not specify which divisions would be impacted by cuts. Insider reached out for comment but did not immediately hear back.
Employees had become increasingly concerned about the possibility of layoffs over the past few weeks after several "bursts" — Shopify's name for teambuilding off-site trips — and other events, were cancelled. Analysts and insiders had also been expecting a major change to Shopify's logistics division, Insider reported Wednesday.
Shopify is selling Deliverr, which it acquired in 2022 for $2.1 billion, and any progress it made on Shopify-operated warehouses for a 13% equity stake in Flexport — on top of its existing equity from previous investments. Jeff Hoffmeister, the chief financial officer, said Shopify's stake in Flexport is in the "high teens" on the company's Thursday morning earnings call.
But 6 River Systems, a warehouse automation and robotics company Shopify purchased in 2019 for $450 million, is being sold to the UK grocery firm Ocado for an undisclosed sum.
Investors have expressed increasing concern that the logistics effort is an anchor on Shopify's balance sheet. In his letter to shareholders, Lütke called the entire initiative a "worthwhile side quest."
Shopify said Thursday that Flexport would become its official logistics partner.
Lütke's letter detailing the changes indicated Shopify would be doubling down on finding further uses for artificial intelligence in ecommerce.
Shopify has frequently spoken about its goal to build a more efficient and focused organization amid economic uncertainty. An internal document sent to the company's talent org earlier in 2023 said that Shopify would hire fewer people this year. It said it would employ targeted, "unorthodox" strategies to find the "very best people in their respective craft" as it prioritized efficiency.
In March, Shopify announced a new framework that would classify employees as either managers or "crafters" to incentivise more employees to be individual contributors. The company said it expected there would be fewer managers overall under this framework.
Lütke's note on Thursday said the balance between managers and crafters had become "unhealthy" at Shopify.
"One of the insidious consequences of this is that it leads to the company increasingly celebrating activities rather than crafter driven outcomes," the note read. "With the right numbers we'll fully focus on outcomes and impact."
The layoffs follow a series of quiet firings affecting department employees, including those in talent acquisition. In March, Shopify rescinded full-time job offers for several former interns who were set to join the company this summer and fall.
There have also been numerous changes in the company's upper ranks in recent months. In January, Allan Leinwand, Shopify's chief technical officer, left the company after just over a year in the role. Lütke said in an internal post that he would be taking over Leinwand's responsibilities instead of hiring a new CTO.
Near the end of last year, Shopify brought on Hoffmeister, a former Morgan Stanley investment banker, to replace Amy Shapero as CFO, and promoted Kaz Nejatian to COO, a role previously held by Toby Shannan.
Shopify laid off 10% of its workforce — more than 1,000 people — last July. At the time, it said the layoffs were necessary because the company had miscalculated the long-term impact that the pandemic would have on the ecommerce sector.
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