Shopify CEO Tobi Lütke made the announcement early Thursday, May 4, that the firm will be laying off 20% of its staff and selling most of its logistics business to supply chain tech firm Flexport.
As Lütke said to staff and stockholders in a statement on Thursday, "I recognize the crushing impact this decision has on some of you, and did not make this decision lightly."
He added that the next few days will be very important and challenging for the company. He acknowledged that this is the best option for Shopify in the long run, though it will have a devastating impact on its many employees.
The corporation, however, has not revealed which departments would be affected by the layoffs. In an earlier report, analysts and insiders alike had been anticipating a big shakeup in Shopify's logistics sector.
Impending Fresh Wave of Layoffs
Employees' fears of layoffs have grown over the last several weeks as a result of the cancellation of many "bursts," the Shopify term for team off-sites and other events.
In a report by Insider, the layoffs come after a slew of ostensibly unannounced firings throughout the company, including in the talent acquisition department. Several former interns offered full-time positions with Shopify in March were informed that they would not be hired.
In July 2022, Shopify already let go of over a thousand employees, or 10% of the total staff. At the time, the firm said it had to lay off workers because it had underestimated the pandemic's long-term effect on the e-commerce industry.
Flexport as Shopify's Logistics Partner
After investing a total of $2.1 billion in 2022 to acquire Deliverr, Shopify has decided to sell the company and any progress achieved on Shopify-operated warehouses in exchange for a 13% ownership share in Flexport.
On the other hand, Shopify paid $450 million for the robotics and automation business 6 River Systems in 2019. Nevertheless, CNBC reported that it is now selling those assets to the UK supermarket chain Ocado for an unknown fee.
The logistics endeavor has been a source of growing investor worry for Shopify. In his letter to investors, Lütke described the project as a "worthwhile side quest."
Lütke said Shopify would be doubling down on exploring further applications of artificial intelligence (AI) in e-commerce.
Ambitious New Company Layout
According to Insider, Shopify's stated mission is to become a more streamlined, customer-centric business in the face of economic instability. Shopify would hire fewer workers in 2023, according to an internal letter issued to the company's talent organization early that year. To find the most talented experts in each field, they said they would use "unorthodox" strategies.
Shopify introduced a new structure in March that divides workers into two groups: managers and crafters, intending to encourage more people to take on independent roles. The corporation predicted there would be fewer managers due to this structure.
But according to Lütke's letter on Thursday, the ratio of managers to creators has become "unhealthy" at Shopify.
