Shopify Announces a 20% Staff Layoff
Throughout these tumultuous economic times, businesses affiliated with almost all industries have continued to experience layoffs of great measures. Tech companies are no exception. The latest to join these is Shopify – “a Canadian multinational e-commerce company headquartered in Ottawa.” This past Thursday, Shopify stated that it would be “cutting 20% of its workforce,” which consisted of around 11,600 employees and contractors. On the same day, 23% of the company’s shares also closed.
Shopify’s CEO Tobi Lütke issued a statement regarding these job cuts on the organization’s website, noting that he “recognize[d] the crushing impact this decision ha[d] on some of [his employees],” and he “did not make this decision lightly.” Further he asserted that Shopify’s “numbers were unhealthy, just like it is in much of the tech industry.” Employees who were let go were notified of this decision via email and were promised at least 16 weeks of severance with an additional week for each year of service at Shopify. This group was comprised of about 2,300 people, costing Shopify around $150 million in total severance pay.
Although Lütke announced the company-wide layoff, he did not mention which specific branches would be affected. It seems, however, that Shopify is targeting managerial positions during this round of cuts instead of software development staff. Lütke maintained that the company currently had a surplus of managers on board. “The balance of crafter to manager numbers is a tricky one to strike. Too few and you risk misalignment on the most important things, too many and you add heavy layers of process, approvals, and…side quests,” he remarked.
To add, this was Shopify’s second round of layoffs in less than a year. Last July, the company let go of approximately 10% of its employees. In the wake of the COVID-19 pandemic, online shopping platforms thrived, as safety restrictions were instituted by the government and people remained isolated due to health concerns. Lütke attributed the preliminary staff cut to Shopify “misjudg[ing] how long [this] e-commerce boom would last.”
During this round of layoffs, Shopify also disclosed it would be selling 6 River Systems – a robot maker the business previously purchased from the U.K.-based technology company Ocado. Additionally, the brand will be handing over its logistics unit, which includes a delivery service titled Deliverr, to Flexport. The layoffs, in tandem with these major sales, were executed to help Shopify refocus on its main priority – creating tools for businesses to sell products and services online.
Several critics also commented on the company’s decision to implement a layoff of such magnitude. Management professor James Bowden of the University of Ottawa noted that the growing company could still be affected by forces impacting the tech industry, “as we have seen many layoffs in the [sector]in the last year or two.” Anurag Rana, a Bloomberg Intelligence analyst, argued that the staff cut would, in the long run, be beneficial to Shopify. “This strategy shift, while painful in the short-term due to writedowns and layoffs, will increase the company’s focus on selling more products through its platform,” Rana claimed.