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Shopify Cuts Workforce 10% as Ecommerce Demand Cools

Shopify Cuts Workforce 10% as Ecommerce Demand Cools
Image courtesy of Shopify

In a letter to employees published to the company’s site, Shopify CEO Tobias Lütke revealed that the ecommerce platform would lay off 10% of its staff — approximately 1,000 jobs — effective July 26, 2022. The news came only one day before the company held its Q2 2022 earnings call on July 27, 2022, during which Shopify reported a net loss of $1.2 billion. Departments including recruiting, support, and sales will be the most affected by the reductions, in addition to jobs that Lütke identified as “over-specialized and duplicate roles, as well as some groups that were convenient to have but too far removed from building products.”

Citing the steady growth of ecommerce prior to the pandemic, Lütke noted that the company had expected the COVID-19 surge to continue and even expand over the next five to 10 years. However, while Shopify sees continued growth within ecommerce, consumer demand for physical retail experiences has also increased, forcing Shopify to reconcile its rosy digital predictions with the reality of how customers want to shop.

“When the COVID pandemic set in, almost all retail shifted online because of shelter-in-place orders,” Lütke said in the memo. “Demand for Shopify skyrocketed. To help merchants, we threw away our roadmaps and shipped everything that could possibly be helpful.” 

It’s now clear that bet didn’t pay off,” Lütke added. “What we see now is the mix reverting to roughly where pre-COVID data would have suggested it should be at this point. [It’s] still growing steadily, but it wasn’t a meaningful five-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. Now, we have to adjust. As a consequence, we have to say goodbye to some of you today and I’m deeply sorry for that.”

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Amid the news, Shopify stock dropped 15.34%. Shopify’s move to reduce its workforce was made during a challenging time for many digital commerce players:

  • Earlier in July, Amazon announced that it would delay or cancel 16 warehouse openings in the U.S. due to slowing ecommerce demand.
  • Personal styling and apparel ecommerce platform Stitch Fix cut 15% of its salaried workforce in June following less-than-stellar Q3 2022 results.
  • During Q1 2022, following the arrival of new President and CEO Barry McCarthy, fitness technology company Peloton shared that it would cut its global workforce across all business operations with a 20% reduction in corporate roles, decreased owned-and-operated warehouses and delivery teams and adoption of commercial agreements with third-party logistics providers.

This story has been updated to show Q2 2022 earnings information.

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