Shopify CEO cuts 10 percent of staff, says his e-commerce ‘leap’ bet “didn’t pay off”

The pandemic brought about unprecedented challenges to companies around the world, forcing many businesses to shut down or lay off their employees. Shopify experienced growth instead, but even so, the e-commerce platform is now laying off nearly 10% of its workforce, CEO Tobias Lütke said in a letter published online Tuesday. That’s about 1,000 employees – the company had a workforce of around 10,000 as of December.   

Shopify grew its staff during the pandemic-driven e-commerce boom, betting that the move away from physical stores to e-commerce would be permanent. 

“It’s now clear that bet didn’t pay off,” Lütke wrote.

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The e-commerce company greatly benefitted from almost all retail shifting online due to people not leaving the house during the pandemic. Lütke explains that when the surge hit, he had to decide whether the growth was temporary or the new normal. He believed that the share of dollars that travel through e-commerce rather than physical retail would permanently leap ahead by five or even 10 years and chose to expand the Shopify team as a result.

“What we see now is the mix reverting to roughly where pre-Covid data would have suggested it should be at this point,” Lütke wrote. “Still growing steadily, but it wasn’t a meaningful 5-year leap ahead. Our market share in ecommerce is a lot higher than it is in retail, so this matters. Ultimately, placing this bet was my call to make and I got this wrong.”

The statement was accompanied by a US Census Bureau plot graph that depicted the steady growth in e-commerce since the 2000s. The growth hit a sharp increase in 2020 with a decrease beginning shortly after.  Ecommerce is still on the upward trend as it is currently steadying at the point it was predicted to be before the surge occurred. 

The roles affected by this week’s layoffs were those in recruiting, support and sales. Over-specialized and duplicate roles were also eliminated. 

Along with other forms of assistance, the employees affected will receive 16 weeks of severance pay, plus an additional week for every year of tenure at Shopify.