Canada-based Shopify cuts 10 percent of its global workforce, nearly 1000 employees. CEO Tobi Lütke said that the decision is a result of the miscalculated bet on e-commerce during the pandemic which didn’t pay off and the revenue growth slowed down.
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.
Tobi Lütke, CEO, Shopify
The Big Bet
Addressing the change, the CEO, in a memo posted on the official website, said, “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,” wrote CEO Lütke in a memo to the staff.
“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.”
“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,” Lütke further writes.
Building companies comes with high highs and low lows. Today I had to share some sad news with Shopify. https://t.co/gNO37lWYpg
— tobi lutke (@tobi) July 26, 2022
According to Business Insider, the company has slashed 50 staffers since April, delayed a compensation overhaul and cancelled a few fall internships. The company announced a compensation overhaul after some employees expressed concerns over Shopify’s plummeting stock price and its impact on the total value of their compensation.
According to WSJ, Shopify’s workforce increased from 1900 in 2016 to 10,000 in 2021. Shopify witnessed a sudden boost during the pandemic when its business doubled in 2020. For 2021, it reported revenue growth of 57 percent, up to $4.6 billion. Its total sales value conducted on the platform also increased 47 percent year over year.
Compensations
Lütke states that the affected employees will receive severance pay for 16 weeks besides one extra week for every year the employee has been part of the company. Shopify is also helping employees with career coaching to find another job. To lift itself out of a slump, Shopify is now collaborating with social media platforms like Twitter and YouTube as influencers begin to sell their own merchandise.
Post-pandemic Disaster
The move came when a string of companies are reducing their staff because of the fallout from the post-pandemic economy. As per the report of Crunchbase News, over 30,000 tech workers in the US have been removed in 2022.
Netflix removed hundreds of workers after the number of subscribers plummeted reportedly. Peloton also slashed 2800 staffers. Meanwhile, the cryptocurrency industry is undergoing layoffs. Firms such as BlockFi, Coinbase, Gemini and Crypto.com have reduced the number of employees as a result of the economic drop-off. However, companies like Google, Apple, Meta and Spotify are either slowing the pace of hiring or planning to do so.
