Shopify Announces Layoffs, 10% Reduction In Workforce

Liz Morton
Liz Morton


Just one day before Shopify is set to release Q2 2022 earnings, they've announced layoffs with a planned 10% reduction in workforce, or about 1,000 employees.

If any current or ex-Shopify employees have insight they'd like to share, contact me. Requests for confidentiality will absolutely be respected.

CEO Tobi Lutke said the company had bet big on demand and growth seen in the early days of the pandemic and that bet has not paid off as shoppers have largely returned to pre-pandemic habits.

Changes to Shopify’s team

...the next part of the journey will involve fewer teammates than we have picked up along the way. Shopify has to go through a reduction in workforce that will see about 10% leave by the end of the day.

Most of the impacted roles are in recruiting, support, and sales, and 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. Emails will go out in the next few minutes that will clarify if your role was affected; those impacted will then have a meeting with a lead in their team.

For a company like ours this news will be difficult to digest. It will be even harder for those leaving today. I’ll share as many details as I can about how we got here and, for those that are leaving, what will happen next.

How we got here

When the Covid pandemic set in, almost all retail shifted online because of shelter-in-place orders. Demand for Shopify skyrocketed. To help merchants, we threw away our roadmaps and shipped everything that could possibly be helpful. It was hard, but we know for a fact that more merchants’ businesses survived the pandemic because of the work we did in this time and that’s exactly what our mission is about.

Shopify has always been a company that makes the big strategic bets our merchants demand of us - this is how we succeed. Before the pandemic, ecommerce growth had been steady and predictable. Was this surge to be a temporary effect or a new normal?

And so, given what we saw, we placed another bet: 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. What we see now is the mix reverting to roughly where pre-Covid data would have suggested it should be at this point. Still growing steadily, but it wasn’t a meaningful 5-year leap ahead. Our market share in ecommerce is a lot higher than it is in retail, so this matters. Ultimately, placing this bet was my call to make and I got this wrong. Now, we have to adjust. As a consequence, we have to say goodbye to some of you today and I’m deeply sorry for that.

The company reportedly plans to offer affected employees 16 weeks of severance pay plus an additional week of pay for each year that they had been at the company.

The news sent Shopify's stock price plunging 16.5% this morning to $30.72, signaling what could be a rough start to ecommerce earnings reports over the next two weeks.

Q2 2022 Ecommerce Earnings Call Roundup
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We'll also be keeping an eye out for signs of hiring slow downs/freezes and layoffs in other ecommerce and tech companies.

PayPal recently had a round of layoffs in May:

PayPal Layoffs Continue As Pressure To Cut Costs Mounts
PayPal slashes jobs at headquarters in San Jose as well as risk management & ops across the US & Ireland.

And while layoffs have not been announced for eBay, I am seeing possible signs of a hiring slowdown as open positions at the company have dropped from 696 to 625 in the last 3 weeks.

Could Hiring Slowdown, Layoffs Be On The Horizon At eBay?
As pandemic-fueled ecom boom wanes, tech companies are slowing hiring, announcing layoffs - is eBay next?

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Liz Morton is a seasoned ecommerce pro with 17 years of online marketplace sales experience, providing commentary, analysis & news about eBay, Etsy, Amazon, Shopify & more at Value Added Resource!