Shopify cuts workforce by 20%

Shopify Inc. has announced that it will cut its workforce by approximately 20% and divest its logistics operations to Flexport, a company specializing in supply chain management.

On Thursday morning, the e-commerce powerhouse based in Ottawa revealed its plans to reduce its workforce and sell its logistics business to Flexport, citing its intention to concentrate on its primary goal of simplifying commerce.

According to CEO Tobi Lutke, accomplishing this goal requires minimizing "side quests" that tend to be disruptive by diverting the company's attention.

In an open letter announcing the company's restructuring, Tobi Lutke stated that technological advancements move towards simplicity, and entrepreneurs are more likely to thrive when they simplify. However, with the AI era, he believes that the new opportunities unlocked and open.

Tobi Lutke's message did not specify the exact number of employees that will be affected by the job cuts. However, in the summer of last year, Shopify had approximately 10,000 employees.

Lutke acknowledged the significant impact this decision would have on some of the company's employees and emphasized that it was not an easy decision to make.

Lutke assured the affected employees that they would receive a severance package of at least 16 weeks and an additional week of pay for each year of service at Shopify. The departing staff will also be covered by medical benefits and an employee assistance program during this period.

He believes that these changes will result in Shopify having a highly concentrated pool of talented employees and the ability to achieve its objectives at a significantly improved speed, pace, and with better outcomes.

The transaction between Shopify and Flexport is anticipated to be finalized in the second quarter of 2023, subject to regulatory approval and certain conditions.

As Shopify announced its plans to restructure, it also disclosed that it had generated $68 million in profits during the first quarter of the year.  Last year it experienced a net loss of $1.4 billion.