Shopify Cuts 20% of Staff After Sale of Logistics Unit

Shopify is letting go more than 2,000 workers amid a renewed focus on eCommerce.

The company announced Thursday (May 4) that it was reducing the size of its operations by 20% as it sells its logistics unit to Flexport.

In a memo to employees, CEO Tobias Lütke said that “this means some of you will leave Shopify today. I recognize the crushing impact this decision has on some of you, and did not make this decision lightly.”

Shopify had 11,600 employees at the end of 2022. A 20% reduction would impact around 2,300 positions. Lütke said affected employees would get at least 16 weeks’ severance and plus a week for every year they’ve been with the company.

That’s the same offering Shopify gave employees last year when it cut 10% of its staff as it coped with slowing growth following consumers’ return to in-store shopping.

As PYMNTS wrote Thursday in a report on the company’s earnings, a recent Securities and Exchange Commission (SEC) filing by the company could indicate why Shopify is focusing more fully on eCommerce.

The filing says that Shopify Payments makes up a revenue stream that is beneficial to top operating margins “as Shopify Payments requires significantly less sales and marketing and research and development expenses” compared to its core subscription business.

For the three months of the year, the Shopify Payments penetration rate was 56%, resulting in gross payments volume (GPV) of $27.5 billion facilitated using Shopify Payments. That’s up from a penetration rate of 51% resulting in GPV of $22 billion via Shopify Payments in the same period in 2022, the filing said.

“Narrowing the focus means the company can more fully concentrate on relatively higher margin businesses while maintaining some financial skin in the game tied to the success of fulfillment services with its stake in Flexport,” PYMNTS wrote.

Lütke put it this way: the company needed to reduce its focus on the “side quest” of logistics to focus on its “main quest,” i.e. eCommerce.

“For the past year we’ve been subtracting everything that’s in the way of making the best possible product,” he wrote.

“This is extremely important, because we are heading into a decade of high velocity and massive change. We will require speed, agility, and a great deal of innovation.”

Shopify’s job cuts come at a time when U.S. layoffs have hit their highest level in more than two years, according to recent Labor Department data.

As PYMNTS noted earlier this week, companies are looking to preserve operating margins and make profitability-focused investors happy, which has led to job cuts at businesses that grew their headcounts during the pandemic, such as Lyft and Meta.