Focus on core business: Shopify is laying off a fifth of its employees

The e-commerce service provider Shopify wants to lay off another 20 percent of its workforce and is separating from its logistics division. This was announced by CEO Tobias Lütke in an email to employees that the company published on Thursday. It is estimated that more than 2,000 employees will be affected.

The affected employees will receive severance pay equal to four months’ salary plus one week for each year they have been with the company. The health insurance subsidies will also continue to be paid for this period. According to US media reports, there had already been rumblings among the workforce and fears of layoffs after Shopify canceled some employee events.

Shopify only laid off around 1,000 employees in the summer of 2022 because the e-commerce boom of the Corona years had subsided and consumers were going back to their old shopping habits. Shopify expected the trend to be more sustained.

Founded in Canada in 2006, the company offers, among other things, proprietary software that small and medium-sized companies can use to create online shops. The main market is in North America. Since going public in 2015, Shopify has experienced rapid growth fueled by the e-commerce trend of the coronavirus-dominated 2020 and 2021.

Shopify now wants to focus more on this core business. The company is selling the logistics division it has built up in the past to the freight service provider and existing partner Flexport. In return, Shopify will receive an additional 13 percent stake in Flexport, in which it already has a small stake. The deal also includes delivery service Deliverr, which Shopify acquired for $2.1 billion last year.

A look at the balance sheet for the first quarter of 2023, which was also published on Thursday, shows significant losses in the operating business despite strong sales growth. The company now wants to cut costs with the layoffs and concentrate on its core business.

Shopify was able to increase sales compared to the same quarter last year from 1.2 to 1.5 billion US dollars. At the same time, costs increased, resulting in an operating loss for the company of 193 million US dollars. The fact that Shopify can report a bottom line profit of 69 million US dollars, or 5 cents per share, is thanks to the company’s other income, including from investment transactions. At the start of the New York Stock Exchange, the share rose by a good 20 percent.

Large-scale job cuts are currently taking place at almost all tech companies. US giants like Amazon, Google or Meta have had several waves of layoffs. Most recently, Red Hat and the start-up Clubhouse had laid off numerous employees. Observers also see the wave of layoffs as a result of “over-hiring” by the tech companies. The companies did not hire out of necessity, but to fish the good forces away from the competition.


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