Shopify announced on Tuesday it would be laying off 10 percent of its workforce by the end of the day, as the company says its “bet didn’t pay off” in its projections following the pandemic.
Tobias Lütke, the CEO of Shopify, sent out a company-wide memo saying jobs would have to be cut in recruiting, support and sales roles. Other positions that seem like duplicates or not directly involved in sales enough will also be in jeopardy.
Shopify saw a huge boost in sales at the beginning of the COVID-19 pandemic, when many stores shut down and people moved online for their shopping needs. Lütke said the company had to determine if this spike would just last during the pandemic or continue over time.
“We bet that the channel mix – the share of dollars that travel through ecommerce rather than physical retail – would permanently leap ahead by 5 or even 10 years. We couldn’t know for sure at the time, but we knew that if there was a chance that this was true, we would have to expand the company to match,” he said.
“It’s now clear that bet didn’t pay off. What we see now is the mix reverting to roughly where pre-Covid data would have suggested it should be at this point,” he added.
Shopify will be offering what it described as a “generous severance package” to employees who are laid off, with 16 weeks of severance pay and extra weeks for every year an employee worked at the company.
The company will extend medical benefits, remove any equity cliff, provide outplacement services, allow employees to keep home office furniture provided by the company and give a kickstart allowance for the former employees to buy themselves new laptops.
After the announcement of the layoffs, Bloomberg reported that Shopify shares decreased by 17 percent.
“Ultimately, placing this bet was my call to make and I got this wrong. Now, we have to adjust. As a consequence, we have to say goodbye to some of you today and I’m deeply sorry for that,” Lütke said.