Shopify shares witnessed a sharp drop of 17 percent after the company announced layoffs in a blog post. The e-commerce platform slashed 10 percent of its global workforce due to a soured bet that the pandemic boom in online shopping trends would continue. The move will impact approximately 1000 staffers. “Ultimately, placing this bet was my call to make and I got this wrong,” Shopify CEO Tobi Lütke wrote in a corporate blog post.
The stock plummeted to $30.55, the lowest since July 15. Shopify’s shares have lost over 75 percent of their value this year. However, the tech-focused Nasdaq Composite lost around 26 percent this year.
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.
Tobi Lütke, CEO, Shopify
The Wrong Bet
Sharing how the company got here, CEO Lütke wrote, “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”. He added that it “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,” wrote the CEO.
Shopify’s business saw a boom in 2020, reporting 57 percent revenue growth for 2021. However, after hitting an all-time high above $176 in November 2021, its stocks have been falling. The layoffs will mainly impact recruiting, support and sales departments among others in the company that sells tools to help others run their e-commerce websites.
Major breakout for Shopify today after several big Wall Street firms downgraded the stock in the last 2 weeks.$SHOP $AMZN pic.twitter.com/tXJ7hw77Wg
— Matt McCall 🇺🇦 (@MatthewMcCall) August 3, 2022
Shift In Consumer Pattern
Shopify layoffs have been announced at a time when investors are selling off equities in anticipation of recessions across the globe. There is also a huge shift in the expense pattern of the US consumers, who are now spending more on services rather than household items after COVID restrictions were lifted. Hot inflation has made consumers spend on necessities while reducing expenses on consumer discretionary items.
