Shopify is set to cut about 10 percent of its global staff, which amounts to approximately 1,000 employees.
The cuts were first reported by the The Wall Street Journal, which cited an internal memo that CEO Tobi Lütke sent to staff on Tuesday.
The roles most impacted by the layoffs are in recruiting, support, and sales.
According to the memo, which Shopify posted online, the layoffs are necessary as the e-commerce boom that fueled Shopify’s growth in recent years has cooled.
“It’s now clear that bet didn’t pay off,” Lütke said in the memo, citing a bet Shopify made that the share of dollars that go through e-commerce rather than physical retail would “permanently leap ahead” by five or even 10 years due to the COVID-19 pandemic.
“What we see now is the mix reverting to roughly where pre-Covid data would have suggested it should be at this point,” the CEO wrote. “Still growing steadily, but it wasn’t a meaningful 5-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.”
The roles most impacted by the layoffs are in recruiting, support, and sales. Lütke also noted that, across the company, Shopify is eliminating “over-specialized and duplicate roles, as well as some groups that were convenient to have but too far removed from building products.”
In response to a request for comment, a Shopify spokesperson referred BetaKit to the memo.
The cuts come just more than a month after BetaKit reported that the company told employees at a June 23 town hall that they should lower their expectations regarding company growth, and that hiring will slow.
Shopify had previously set aggressive hiring goals, specifically around engineers, attempting to hire 2,021 roles last year. Lütke told staff at the June town hall that the company no longer needs to target such numbers.
Reports of the layoffs come one day before Shopify is set to announce its second quarter 2022 financial results. According to The Globe and Mail, analysts lowered their expectations for the company ahead of the results citing the macroeconomic environment.
Last quarter, Shopify’s Q1 2022 results saw the e-commerce company’s revenue growth continue to slow, as the pandemic forces that drove the rise of e-commerce waned. While the company bought Deliverr to bolster its fulfillment network, Shopify’s year-over-year revenue growth slowed in comparison to 2021 even with an increase of about 21 percent.
Regarding laid-off employees, Lütke noted in the memo that Shopify is offering “a generous severance package.” This includes 16 weeks of severance pay, plus an additional week for every year of tenure at Shopify. “We’ll remove any equity cliff, and extend any medical benefits,” the CEO added.
The company is also offering outplacement services, including career coaching, interviewing support, and resume crafting. Shopify has also promised to connect those affected with companies looking to hire, and the memo notes that Shopify will continue to pay now-former employees’ internet costs for the period and allow them to keep at-home office furniture while offering an allowance that can be used to buy new laptops.
Speaking to what’s next for Shopify, Lütke said in the memo, “our opportunity is massive and it’s still early days for Shopify.”
“Every team here is now either focused on building products or directly supporting those who do,” he wrote. “Our customers are merchants, entrepreneurs, and small businesses owners – the bedrock of our economy and precisely those that are typically hit hardest during recessions. Most are already feeling it. We again have a clear objective in these challenging macro economic times, and we will use everything we’ve got to help them succeed and come out stronger. That’s our core mission.”
Shopify is one of many tech companies that are feeling the impact of the macroeconomic environment, including large tech companies like Meta, Microsoft, and Netflix. In Canada, that list includes Wealthsimple, Introhive, Clutch, WonderFi, Thinkific, Bonsai, BBTV, Legible, and Proposify.