Shopify announced its intention to lay off more than 2 thousand employees as part of efforts aimed at intensifying activities in the field of e-commerce.
Last Thursday, May 4, this company announced a 20% reduction in the volume of its activities. This change is due to the sale of the Flexport logistics division.
In a memo to employees, the company’s CEO Tobias Lutke said that the process of reducing the number of staff will not be instantaneous in terms of the timing of implementation. He noted that the layoffs were not an easy decision for him and stressed that he understands the devastating impact this situation will have on some employees.
As of the end of last year, the number of Shopify workers was 11,600 people. As part of the upcoming reduction, about 2,300 people will be out of work. Lutke said that employees who will be affected by the process of reducing the workforce will receive severance pay for 16 weeks plus a week for each year of their career in the company.
This proposal, as part of a wave of layoffs, is similar to the one that the firm implemented in 2022, during a period of 10% staff reduction. At that time, layoffs were a measure in the fight against slowing growth amid the return of consumers in stores.
The company recently applied with the Securities and Exchange Commission (SEC). According to experts, this action may indicate the implementation of the firm’s intention to focus on e-commerce activities.
Shopify Payments provides a revenue stream that has value in the context of increasing operating profit. This service, compared to the company’s main subscription business, requires fewer costs for sales, marketing, research, and development.
The share of Shopify Payments in the total revenue structure of the company reached 56% in the first three months of 2023. The volume of payments made using this service amounted to $ 27.5 billion.
Narrowing the focus in the business strategy means that the company can concentrate on the business with a relatively higher margin and retain some financial benefits associated with the success of order fulfillment services due to the stake in Flexport.
Lutke says that it is important for the company to reduce attention to the side tasks of logistics and focus on the main task, which is e-commerce. He also noted that over the past year, the firm has removed everything that was an obstacle to creating the best possible product. Lutke justified the importance of this decision by saying that the era of high speeds and large-scale changes is beginning.
The job cuts at Shopify come at a time when the number of layoffs in the U.S. has reached its highest level in more than two years. Companies strive to maintain operating margins and please investors interested in profit. This tactic of activity has led to a reduction in the workforce in those firms that actively recruited staff during the coronavirus pandemic.
As we have reported earlier, Shopify Introduces Commerce Components.