On Tuesday, Shopify announced that it was going to reduce its global workforce by 10%, which means it would lay off about 1,000 workers. The shares of the company plunged 14% after the announcement.
Laying off workforce
The chief executive of Shopify, Tobi Lutke, sent a memo to the staff in which he acknowledge that they had miscalculated how long the e-commerce boom driven by the global pandemic would last.
He said that a number of roles would have to be cut because online spending had seen a broader pullback of late.
According to a securities filing, as of December 31st, 2021, there were about 10,000 people who were working for Shopify.
All of Shopify’s divisions will be impacted by the cuts, but most of them will take place in sales, support, and recruiting.
Lutke said in the memo that they were eliminating duplicate and over-specialized roles across the company, along with some groups that offered convenience but were removed from building products.
With COVID trends waning and economic uncertainty on the rise, a number of technology companies have announced hiring freezes, are laying off workers, or have gone as far as rescinding job offers.
Earlier this month, Facebook’s owner Meta Platforms Inc. and Google parent Alphabet Inc. had also said that they planned on slowing down their hiring.
Other companies that have announced layoffs include Coinbase crypto exchange and streaming giant Netflix.
The Canadian firm that develops tools for other companies to sell their products over the internet enjoyed a lot of benefits during the pandemic because the e-commerce space was booming.
However, with stores reopening and customers resuming their shopping habits before the pandemic, Shopify and other e-commerce companies had to come to terms with the fact that they would not be able to enjoy the same high-flying growth seen earlier.
The company’s CEO had said that their bets had missed the mark because Shopify believed that the increasing mix of online shopping, as opposed to in-store, would move ahead by 5 years, or even 10.
Therefore, Shopify had added to its staff in order to meet the needs of what it had thought to be a sustained switch to e-commerce.
In February, the company disclosed that it had doubled its workforce after the end of 2019, but Lutke said that things had not gone as expected.
He said that the company was now at a point where they should have been in accordance with pre-Covid data and had not managed to leap ahead 5 years.
As far as its second quarter earnings report is concerned, Shopify forecast lower revenue growth in the first half of 2022 because it is dealing with difficult comparisons with the pandemic-era.
The company ended up missing its revenue and earnings estimates and added that the second quarter would be a tough one because of rising interest rates and high inflation.
Shopify also announced that the employees being laid off will be given severance pay for 16 weeks, along with an additional week for every year of their time with the company.