Shopify, powered by pandemic-fuelled growth, entered 2022 with high aspirations. However, the e-commerce giant saw its own share of ups and downs this year. Soon after the global restrictions were lifted, Shopify stock came crashing down. Shopify stock lost 74 percent of its value in 2022 and then the layoff happened.
Businesses across the globe have been hit hard by inflation and fear of recession. And, Shopify is no different. Having said that, the year was not all bad. Shopify’s third quarter result brought relief to the shareholders disturbed by the company’s turbulent first half. Black Friday Cyber Monday records also prove that Shopify could see light at the end of the tunnel. It won’t be an exaggeration to say that Shopify completely owned 2022 with its never-dying approach.
From the acquisition of Deliverr, a leading fulfillment technology provider to layoffs and leadership change, here’s a recap of six Shopify events that hit headlines in 2022.
1. The Acquisition of Deliverr
On May 5, Shopify announced the acquisition of Deliverr, a leading fulfillment technology provider, for $2.1B. The acquisition was completed in July’s first week. Shopify Fulfillment Network (SFN) with the help of Deliverr’s exceptional talent, data, scale and software will offer merchants a one-stop shop for all their logistics requirements. It will enable merchants to have better control of their inventory across all the sales channels. From initial receipt of inventory to smart and efficient distribution, fast delivery and easy returns, it will handle all the difficult work so that merchants can focus on their business growth.
While announcing the acquisition, Tobi Lütke, founder and CEO of Shopify said, “Our goal is to not only level the playing field for independent businesses but tilt it in their favor—turning their size and agility into their superpower. Together with Deliverr, Shopify Fulfillment Network will give millions of growing businesses access to a simple, powerful logistics platform that will allow them to make their customers happy over and over again.”
Merchants will be benefitted in multiple ways from this acquisition. Irrespective of whether or not they are on the Shopify platform, can reduce logistics costs and remove the hassle of managing complex supply chains. Some of the benefits include multichannel inventory management, better alignment between inventory supply and demand along with independent and flexible logistics services. Merchants can also benefit from Shop Promise, a service offering reliable next-day and two-day delivery options to consumers across the United States.
Shopify Fulfillment Network, 6 River Systems, and Deliverr have together formed a broader logistics unit within Shopify. It is being led by Aaron Brown, CEO of Shopify’s logistics group.
2. Layoff
In late July 2022, Shopify slashed 10 percent of its global workforce, around 1000 employees. In a memo to staff, which was later posted on Shopify’s website CEO Tobi Lütke said that the layoff is a result of the miscalculated bet on e-commerce during the pandemic which didn’t pay off.
“Give the growth we saw in the pandemic, we bet that the channel mix—the share of dollars that travel through e-commerce 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 the bet didn’t pay off. Ultimately, placing this bet was my call to make and I got this wrong,” he said.
“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,” Lutke added. Affected employees were given severance pay for 16 weeks besides an extra week for every year the employee has been associated with Shopify. The company said that it will help employees with career coaching to find another job.
According to Business Insider, Shopify removed 50 staffers since April, delayed a compensation overhaul and also cancelled a few fall internships. As per a report published on theglobeandmail.com, Shopify ousted 70 employees in August. Those affected by the fresh layoff were provided with similar severance packages along with an extension of their medical benefits and outplacement services. Shopify also asked them to keep the home office furniture. However, employees were asked to sign a non-disclosure agreement to receive all the compensation. According to Wall Street Journal, Shopify’s workforce increased from 1900 in 2016 to 10,000 in 2021
A number of tech workers lost their job this year due to the economic slowdown. Several companies including Amazon and Netflix downsized their staff.
3. Leadership Overhaul
Shopify announced a major shake-up in September to overcome the downward trend and accelerate growth. The company brought two significant changes in its top leadership by introducing a new Chief Financial Officer and Chief Operating Officer.
Jeff Hoffmeister, a long-time investment banker with Morgan Stanley was hired for the position of CFO. He has replaced Amy Shapero, who has been associated with Shopify for the last four years. Shapero stepped down after the third-quarter earnings announcement, released on October 27. Kaz Nejatian, Vice President for Product will now double up as Shopify‘s Chief Operating Officer. The CEO informed us that he will succeed Toby Shannan, who is retiring from the company after 12 years.
Hoffmeister with 20 years of experience in investment banking has served as a Managing Director for Morgan Stanley in its Technology Investment Banking Group. He has led multiple high-profile transactions during his tenure including Shopify’s initial public offering in 2015″.
Welcoming Hoffmeister on board, Shopify CEO said, “As we position Shopify for the future, the addition of Jeff to our leadership team will continue to strengthen our ability to deliver value for our merchants, partners and investors. We are fortunate to benefit from his more than 20 years of investment banking experience in the technology sector, and his keen vision of the future of the industry”.
Nejatian has led a cross-functional team responsible for developing and delivering entrepreneurial tools on Shopify such as Shop Pay, Shopify Balance, Shopify Capital, Shopify Point of Sale, integrations with social media platforms and a lot more. He has even served as VP & GM of Shopify Money. Soon after the announcement, the new COO took to Twitter to write, “It is now public that Tobi has asked me to serve as Shopify’s next COO in addition to my current role as VP of Product. I am thrilled to take on this new challenge and to support Shopify’s growth, revenue, customer success and merchant services teams.”
4. Rewriting Compensation
In September, Shopify launched Flex Comp, a flexible model of compensation. It gives absolute freedom to the staff to pick either cash or stock for their service to the company. Shopify called Flex Comp a “bold vision”. In its press release, Shopify stated that though the tech industry has changed across the world the story of compensation hasn’t. “But at Shopify, it no longer made sense. We saw an opportunity to write a better story: Flex Comp, an approach to compensation that changes the very foundation of how we reward talent,” it wrote.
The three main elements of Flex Comp are- Agency, Clarity and Impact. While Clarity aimed at making complexities of pay easy to understand for the employees, Impact ensures no “speed limits” to individual growth. However, the most important element is Agency which emphasizes allowing the employee to decide how they want to be paid, cash (the conventional way) or in equity. Shopify explained that if one wants to save for a house or big asset, he/she should go for cash. Similarly, if one is young and at the beginning of the career, then go for “restricted stock units (RSUs)”.
Flex Comp is built with consensus from “nearly every team at Shopify”. The coding for the model was created in two weeks. Shopify called it a war room of founder, CEO and developers who partnered to program Flex Comp. “Just over two years ago we launched our remote-first, Digital-by-Design way of working. Others followed. Flex Comp was the next logical build for Shopify to continue building a company for people – based on flexibility and choice,” the e-commerce giant wrote.
5. Record-Breaking Black Friday Cyber Monday
In Black Friday Cyber Monday (BFCM) 2022, Shopify merchants led the shopping season. While on the first day of the festive sale, Shopify merchants made a record-breaking sale of $3.36 billion, Cyber Monday was concluded with a sale of $7.5 billion. Black Friday Cyber Monday data released by Shopify showed impressive figures. Shopify merchants witnessed a 19 percent rise in sales from the last year. In 2021, total sales recorded were $6.3 billion. More than 52 million consumers preferred stores powered by Shopify this year. It is 18 percent more than the last year’s BFCM data.
Sharing BFCM sales figures from the past four years, Finkelstein tweeted: “2019 – $2.9B. 2020 – $5.1B. 2021 – $6.3B. 2022 – $7.5B. That’s the total global Black Friday Cyber Monday Shopify merchant GMV over the last 4 years. The future of commerce is independent businesses. And they’re powered by Shopify”.
“Black Friday weekend has always been at the core of Shopify. What was once a frantic 1-day US shopping event dominated by big box stores is now a global shopping season where people are buying from their favourite independent brands. Shopify merchants are shaping commerce itself,” he wrote in another tweet.
In its bid to create a sustainable environment, Shopify helps merchants neutralise shipping emissions with Shop Pay. “Every time a customer places an order using Shop Pay, Shopify funds carbon removal to counteract the impact on the planet at no extra cost,” Shopify states. The company had offset over 120,000 tonnes of carbon in the last two years. This year Shopify has funded 56,000+ tonnes of carbon removal.
6. A Step Ahead in Carbon Removal Pledge
In December, Shopify partnered with Stripe, an Irish-American financial services company in an $11 million commitment for carbon removal projects. The joint effort aims to develop an effective technology for carbon removal from the atmosphere and carbon content from the oceans. To deal with climate change companies like Shopify, Stripe, Meta, McKinsey Sustainability and Alphabet have established Frontier fund and pledged to invest $925 million in carbon removal projects between 2022 and 2030.
Talking about the same, Stacy Kauk, Head of Sustainability at Shopify said, “Alongside Stripe, we’re purchasing $11 million worth of carbon removal from six new companies: Arbor, Captura, Carbon To Stone, Cella, CREW, and Inplanet. It’s an exciting development in our fight to reverse climate change. We’re inspired by the caliber and rate of new companies entering the market. Through these purchases, we’re making it possible for them to prove their impact and scale.”
As a part of the project, Shopify and Stripe have pledged to purchase 7,011 tonnes of carbon components from seven companies, paying a total of $3.5 million. The prices will range from $227 to $1,318 per tonne. Along with this, the two companies have also decided to invest $7.5 million in technical advancements.
“At Shopify, we know the only way to future-proof our planet is to reverse climate change. Even if we stopped all emissions right now, there’s still too much carbon in the atmosphere. No solution will single-handedly solve this problem. When it comes to scaling carbon removal technologies, there’s much more work to do,” said Kauk.
