Shopify Inc. says it will reduce its workforce by 20 percent
and sell its logistics business to Flexport, a supply chain management company.
The Ottawa-based e-commerce giant announced the moves on
Thursday morning, positioning them as a way to help him focus on his core
pursuit: facilitating commerce.
But achieving that feat means cutting back on “side
missions” that CEO Tobi Lutke described as “always a distraction because the
company has to split the focus.”
“Technological progress is always moving towards simplicity,
and entrepreneurs are more successful when we simplify. But now we are at the
dawn of the AI era and the new capabilities being unlocked are
unprecedented,” he said, in an open letter. announcing the changes. .
“Our core mission demands that we build the best that is now
possible, and that has just completely changed.”
Lutke’s note did not include the number of staff the company
would be leaving, but before Shopify laid off about 1,000 workers last summer,
it had roughly 10,000 employees.
“I recognize the crushing impact this decision has on some
of you, and I did not take this decision lightly,” Lutke wrote.
Twenty percent of the remaining workers would amount to
about 1,800 people.
In February, Shopify president Harley Finkelstein had said
that no further cuts were in the works.
He told The Canadian Press on Thursday that the company has
no further plans to lay off any more workers.
“We think, on the other side of this, we’ll be in very, very
good shape,” he said.
Lutke promised departing staff at least 16 weeks of
severance plus one week for each year they are with Shopify. Medical benefits
and an employee assistance program will cover staff who leave during the same
period.
Those who leave will also get to keep their office
furniture, and while they will have the company laptops, Lutke said Shopify
will help pay for the new ones.
“It’s a tough day. This is not something you want to do as a
leader or as a company,” Finkelstein said.
“But sometimes easy and right aren’t the same, and in this
case, hard turns out to be right.”
The changes will leave Shopify with an “incredible talent
density” and the ability to execute on its goals at a “much, much better speed,
better pace, and with better results,” he added.
“I am more optimistic now than ever before about the future
of this company,” he said.
In addition to the staff departures, Lutke’s memo announced
the sale of Shopify Logistics, which he had marketed as a way for merchants to
get products “from the dock to the front porch.”
Under the terms of the agreement, Shopify will receive
shares representing a 13 percent stake in Flexport and the ability to appoint a
director to the Flexport board. Adding to his previous involvement with the
company, Finkelstein said Shopify’s involvement in Flexport is now in its
“teens.”
Flexport will become the official fulfillment partner of
Shopify.
The transaction is expected to close in the second quarter
of 2023, but is subject to certain conditions and regulatory approval.
Shopify’s announcements came as it revealed that it made
US$68 million in the first quarter of the year. That compares with a net loss
of $1.4 billion in the same period a year earlier.
The company’s net income, which it reports in US dollars,
rose to a profit of five cents per share compared with a loss of $1.17 cents per
share a year ago.
Revenue for the period ended March 31 increased 25 percent
over the prior year to $1.5 billion.
This report by The Canadian Press was first published on
May 4, 2023.
