Shopify lays off 10% of its workforce, shares drop 14%

E-commerce giant Shopify laid off 10% of its workforce, or 1000 employees, CEO Tobi Lutke announced yesterday. Following the news, the company shares plunged 14% to $31.55. 

Lutke said that the impacted roles are mainly in recruiting, support and sales, and the company is also ‘eliminating over-specialized and duplicate roles, as well as some groups that were convenient to have but too far removed from building products.’

He said the lay-off is a result of his bet that the pandemic-driven boom in the e-commerce industry would last after the pandemic and the amount of money spent on e-commerce retails instead of physical ones ‘would permanently leap ahead by 5 or even 10 years’. 

To catch up with the skyrocketing demand for e-commerce marketplaces, the company grew its team hiring over 8,000 new employees between 2016 and 2021, as reported by the Wall Street Journal. 

‘’Ultimately, placing this bet was my call to make and I got this wrong. Now, we have to adjust,’’ said CEO Lutke. ‘’As a consequence, we have to say goodbye to some of you today and I’m deeply sorry for that.’’

He said that Shopify will offer 16 weeks of severance pay to impacted employees, and an additional week for every year they served at the company. It will also provide career counselling to help them find their new jobs and won’t take back previously-given home equipment such as computers, said Luke. 

Shopify’s lay-off news comes a week after the tech giant Google announced it’d freeze hiring for two weeks. To cope with the rising costs amidst the ongoing economic slowdown, many companies recently announced lay-offs and hiring freezes, including Meta (Facebook), Apple, Twitter, Spotify, Netflix, Niantic, Uber, Coinbase, Adjust and Applovin.