Shopify announced that it is letting of 20% of its workforce and selling the logistics arm of its business in line with its decision to focus on its primary line of business.
This was made known by Shopify CEO Tobias “Tobi” Lütke in a message titled “Important team and business changes.” According to the e-commerce CEO, “We are changing the shape of Shopify significantly today to pay unshared attention to our mission. There are a number of consequences to this, and I don’t want to bury the lede: after today Shopify will be smaller by about 20% and Flexport will buy Shopify Logistics; this means some of you will leave Shopify today. I recognize the crushing impact this decision has on some of you, and did not make this decision lightly. “
He said that the company would focus on its main business – ecommerce and even explore the opportunities unfolding in the dawn of Artificial Intelligence. HE believes that Shopify has the privilege of being amongst the companies with the best chances of using AI to help its customers.
He admitted that Shopify was pulled into logistics as any other ecommerce business, “because of the way the logistics industry works: a series of disparate players, all focused on different aspects.” He states that logistics is a side business for the company. The move to expand into logistics services was part of Shopify’s ambition to support merchants selling on its platform with one-stop service.
“Logistics was clearly a worthwhile side quest for us, and started to create the conditions for our main quest to succeed. From the beginning, we worked with lots of partners on all aspects of this same problem: warehouses, robotics, transportation, crossdock, freight. We iteratively built a solution, step by step, through software, leases, and M&A deals, that could be an independent company one day. Shopify was the perfect place to bootstrap this effort from 0 to 1 and we have done this. The next step is to take what we have and take it from 1 to N as a main quest.”
Shopify has divested its logistics division, which encompasses Deliverr Inc, a company it purchased for $2.1 billion just under a year ago, to freight forwarder Flexport in an all-stock transaction. As part of the deal, Shopify will receive a 13% equity stake in Flexport, which it had previously invested in. In addition, British online supermarket technology provider Ocado has acquired 6 River Systems, a retail fulfillment automation startup that Shopify had acquired for $450 million in 2019, for an undisclosed sum.
Though the company did not specify the departments or divisions affected in the 20% layoff, Tobi said that they “will receive a minimum of 16 weeks severance plus a week for every year of tenure at Shopify. Medical benefits and access to our employee assistance program (EAP) will be covered through this same period. We’ll also offer outplacement services if you want them, all office furniture we provided is yours to keep. We legally need the work laptop back, but we’ll help pay for a new one to replace it. You’ll have continued free access to the advanced Shopify plan should you opt to take an entrepreneurial path in future. “
This is Shopify’s second round of large layoffs within a year. It laid off 1,000 people in 2022 amid slow post-pandemic growth.
