Shopify Announces Layoffs, 10% Reduction In Workforce
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.
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.
...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.
Liz Morton ~ Founder
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:
Liz Morton ~ Founder
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.
Liz Morton ~ Founder
much too complicated now for a few pounds a year in sales
They just "killed the golden goose". I imported my 1500+ eBay items to there since it was free. Turned out just to be a lot of work for (maybe) 3 sales a month.
The total fees were higher there before this new $20 a month cost structure, even though they claimed otherwise. When one factors in the 3.49% + 49 cent PayPal processing fees so one can get paid, there went a good chunk of profit.
Now they have boosted their commission to 11%, and still claim that the cost to sell there is less than eBay's. And remember that this does not include payment processing. WHY?? Makes no sense at all.
On eBay, for $27.95 a month, I sell over 100 items there every 30-31 days. Makes ZERO SENSE to pay a site $20 to make just a couple of sales. Since they now allow 50 "free listings", I have trimmed my offerings back to just below that amount. Also had to raise all my prices accordingly to absorb the extra selling costs.
The people who run the show here obviously didn't realize that eBay sellers who imported their listings gave the site a great depth of product, which would attract more buyers. Now that will be gone, because NO ONE will pay them $20 monthly for little to no sales.
The site also has technical issues that they refuse to fix. It was a decent resource to enable the occasional sale, but they will soon be stacked onto the eCommerce trash heap of companies that THOUGHT they could compete with Amazon and eBay. Etsy may also suffer the same fate soon, as many sellers are also leaving their site due to high fees, website issues, and poor management.
Basic eComm rule here: When you do not carry any inventory, and sellers are solely responsible for supplying your site with the goods offered, DON'T BITE THE HAND WHICH FEEDS YOU!!!