Shopify lays off 10% of its workforce as rapid pandemic growth slows

Shopify is laying off around 10% of its workforce, or about 1,000 employees, the Wall Street Journal has reported. The Ottawa, Canada-based company told staff in a memo sent on Tuesday that the layoffs are necessary as users are pulling back on online orders and returning to old shopping habits.

“Shopify has to go through a reduction in workforce that will see about 10% leave by the end of the day,” Shopify CEO and founder Tobi Lütke write in a blog post about the layoffs. “Most of the impacted roles are in recruiting, support, and sales, and across the company we’re also eliminating over-specialized and duplicate roles, as well as some groups that were convenient to have but too far removed from building products. Emails will go out in the next few minutes that will clarify if your role was affected; those impacted will then have a meeting with a lead in their team.”

Lütke noted that when the COVID-19 pandemic hit, almost all retail shifted online, which led to demand for Shopify to skyrocket. The company had believed that surging e-commerce sales growth would last past the COVID-19 pandemic and that it had to expand the company to match demand.

“It’s now clear that bet didn’t pay off,” Lütke writes. “Ultimately, placing this bet was my call to make and I got this wrong. Now, we have to adjust.”

The job cuts the company announced today are the first big layoffs Shopify has undergone since the company was founded in 2006. Shopify is offering 16 weeks of severance to the laid-off employees, plus an additional week for every year of tenure at Shopify.

Lütke went on to note that it’s still early days for Shopify and that every team at the company is now either focused on building products or directly supporting those who do. He also noted that although the company has had to adapt to changes in the past, most of those adaptations have been about growing into something bigger, Now, the company has to grow into something “more focused, more driven, and more singular in mission.”

The company is scheduled to release it second-quarter financial results on Wednesday.

Shopify’s layoffs are among a wave of cuts and hiring freezes in the technology sector. An increase in interest rates, supply-chain issues and the reversal of pandemic trends have led to a number of companies reeling in their employee numbers.