Shopify said Tuesday it will lay off 10 percent of its staff as the e-commerce platform’s growth prospects, following a pandemic-fueled boom, are not playing out as company officials had hoped.
The layoffs, of about 1,000 employees, will take place on Tuesday and will mostly affect those working in recruiting, sales and support, CEO Tobias Lütke said in a company blog post. Lütke said Shopify is “also eliminating over-specialized and duplicated roles, as well as some groups that were convenient to have but too far removed from product creation.”
“Everyone will feel this news in their own way, but what is universally true is that it will be difficult for everyone,” he said.
Based in Ottawa, Canada, Shopify is an e-commerce service that allows merchants to quickly create and customize websites to sell products online. In addition to plan fees, Shopify makes money in part by taking a percentage of customer transactions.
Lütke said the growth was steady and predictable just before the coronavirus pandemic it began. At the time, the company had about 10,000 employees and contractors, company filings show. E-commerce received a big boost from the pandemic as retail stores were forced to close and shoppers shopped online. Lütke said he expected the business to continue growing even after retail stores began to reopen, and that he and other company officials were betting the company’s immediate future on that growth.
“It is now clear that the gamble did not pay off,” Lütke said in the blog post. “Now, we have to adjust. As a result, we have to say goodbye to some of you today and I’m very sorry.”
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Laid-off employees will receive 16 weeks of severance pay and an additional week for each year they work for Shopify. They will also have their Internet service paid for for a few more weeks and keep the office furniture provided by Shopify, Lütke said in the post.
However, the layoffs don’t spell doom and gloom for Shopify. The company is much bigger and more profitable now than it was at the start of the pandemic, said Adam Crisafulli, market analyst at Vital Knowledge.
“It is expected to have revenue of approximately $5.7 billion this year versus $865 million in 2019,” Crisafulli said in a research note. “So while growth is slowing, revenue continues to rise and they are among the best-positioned e-commerce companies after Amazon.”
In May, Shopify bought order-tracking software company Deliverr Inc. for 2.1 billion dollars. It has also rolled out new features in recent weeks, including allowing shoppers to purchase items directly from merchant posts on Twitter or YouTube.
Shopify announced its layoffs a day before the company was scheduled to release second-quarter results. Shares were down nearly 15% in the afternoon.
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