Image credits: James Park/Bloomberg/Getty Images
Shopify revealed today It is laying off 20% of its workforce, affecting more than 2,000 people, and is selling off its logistics business. flexport for nearly 13% in stock.
The news comes about 10 months after Shopify announced it would cut 10% of its workforce — nearly 1,000 people — and follows a trend that has seen many big tech companies engage in several rounds of iterations in response to economic headwinds.
It’s hard to know exactly how many people have been affected by this latest round of layoffs. According to Shopify’s our website It has more than 11,600 employees, but it’s just that It recently updated that number of 10,000 employeeswhich does not make sense if it laid off 1,000 employees last year.
Anyway, according to Shopify’s most recent self-reported numbers, today’s news will likely impact in the region of 2,300 workers. The company says those affected will receive at least 16 weeks of severance pay, plus an additional week for each year served on Shopify. They will also receive medical benefits for the same duration.
“Side goal”
in Blog post todayTobias Lütke refers to “main missions” and “side missions”, the former being the core of the company raison d’être Which is what they are best known for – e-commerce software for online retailers. However, shipping and logistics always go hand in hand with e-commerce, which is why Shopify has built this aspect of its business as well, and it’s what Lütke refers to as a “side mission,” and it’s what was ultimately holding back its main operations.
“Side tasks are always distracting because the company has to divide the focus,” said Lutke. “Sometimes this can be worth it, especially when being involved in a side mission creates the conditions under which the main mission can become more successful. Initially, as a small startup, companies focus intensely. It is often said Large companies are more sluggish but that’s not because of their size, it’s because of all the side tasks and distractions that pile up along the way.This happens because larger companies can be a bit inefficient, especially during periods of stable economic boom.But once they do they need to adapt. With some new models they can’t. They will be replaced by more focused competitors, or they will collapse completely.”
But while “focusing more” on its core product was one reason Lütke cited for downsizing, he also cited the burgeoning AI revolution as another reason why Shopify might be better off going back to basics.
“We are entering a decade of high velocity and massive change,” said Lutke. “We’re going to need speed, agility, and a great deal of innovation. Technological progress always steers toward simplicity, and entrepreneurs succeed most when we simplify. But we’re now at the dawn of the age of artificial intelligence, and the new capabilities these capabilities unleash are unprecedented. Shopify has the privilege of being among the companies Which has the best opportunities to use artificial intelligence to help our customers. The co-pilot of entrepreneurship is now possible. Our main quest requires us to build the best thing possible now, and that has completely changed.”
For context, Flexport is a 10-year-old shipping and logistics platform that has raised more than $2 billion in funding from large investors including Andreessen Horowitz and SoftBank. Shopify itself has invested as part of Flexport Fifth round last FebruaryAnd, a few months later, Shopify also acquired logistics startup Deliverr for more than $2 billion. Shopify has clearly been investing heavily in the logistics side of its business, so selling all of that for a 13% stake in Flexport seems like a huge write-off, on the surface at least.
In fact, Flexport was recently valued at nearly $8 billion, which means the new Shopify stake would be worth just over $1 billion, though that doesn’t include the stake Shopify bought during Flexport’s Series E round 15 months ago.
“Infuriatingly humble alcohol fanatic. Unapologetic beer practitioner. Analyst.”