Shopify to cut 10 percent of their workforce by end of day

Shopify announced on Tuesday they would be laying off 10 percent of their workforce by the end of the day as the company says their “bet didn’t pay off” in their projections following the pandemic. 

Tobias Lütke, the CEO of Shopify, sent out a company wide memo saying jobs would have to be cut in recruiting, support, and sales roles. Other positions that seem like duplicates or not directly involved in sales enough will also be in jeopardy. 

Shopify saw a huge boost in sales at the beginning of the COVID-19 pandemic when many stores shut down and people moved online for their shopping needs. Lütke said the company had to determine if this spike would just last during the pandemic or continue over time. 

“We bet that the channel mix – the share of dollars that travel through ecommerce rather than physical retail – would permanently leap ahead by 5 or even 10 years. We couldn’t know for sure at the time, but we knew that if there was a chance that this was true, we would have to expand the company to match,” he said. 

“It’s now clear that bet didn’t pay off. What we see now is the mix reverting to roughly where pre-Covid data would have suggested it should be at this point,” he added. 

Shopify will be offering employees who are laid off what it described as a “generous severance package” with 16-weeks of severance pay, with extra weeks for every year an employee worked at the company. 

The company will extend medical benefits, remove any equity cliff, provide outplacement services, allow employees to keep home office furniture provided by the company and give a kickstart allowance for the former employees to buy themselves new laptops. 

After the announcement of the layoffs, Bloomberg reported Shopify shares decreased by 17 percent. 

“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,” Lütke said.