Shopify cuts workforce by 20 percent, sells logistics arm to Flexport for equity stake
Shopify has announced plans to reduce its workforce by 20%, impacting over 2,000 employees, and has agreed to sell its logistics business to Flexport in exchange for approximately 13% equity. This news comes about 10 months after the company laid off 10% of its workforce, which affected roughly 1,000 employees. Shopify’s decision follows a trend among large tech companies to engage in multiple rounds of layoffs amid economic challenges.
In a blog post, CEO Tobias Lutke discussed the company’s “main quests” and “side quests.” While the main quests pertain to the e-commerce software that Shopify is best known for, shipping and logistics have always been closely related to e-commerce. Consequently, the company has been developing this aspect of the business as well. Ten-year-old logistics platform Flexport has raised over $2 billion from prominent investors, including Andreessen Horowitz and SoftBank. Shopify itself invested in Flexport’s Series E round last February and later acquired logistics startup Deliverr for over $2 billion.
However, Lutke referred to the logistics business as a “side quest” that was ultimately distracting the company from its core operations. He explained that larger companies can afford some inefficiency during stable economic times, but they struggle to adapt when facing new paradigms. Lutke also mentioned the rapidly approaching AI revolution as a reason for Shopify to refocus on its core product, stating that AI will unlock unprecedented capabilities and that Shopify has an excellent chance of utilizing AI to help its customers.
Dropbox recently announced layoffs due in part to the “AI era of computing,” which CEO Drew Houston said would “completely transform knowledge work.” Although the exact number of employees affected by Shopify’s layoffs is uncertain, the company currently reports having over 11,600 employees. Those impacted will receive a minimum of 16 weeks severance pay, along with an additional week for each year of service at Shopify, as well as medical benefits for the same duration.