Shopify cuts headcount by 20%, sells logistics business to Flexport for 13% stake

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Shopify announced today that it has laid off 20% of its workforce, affecting more than 2,000 people. Also, the logistics business he sells to Flexport with about 13% inventory.

The news comes about 10 months after Shopify announced it would cut 10% of its workforce (about 1,000), with many big tech companies cutting staff several times in response to economic headwinds. We are following the trend of working towards reductions.

It is difficult to know exactly how many people will be affected by this series of layoffs. According to Shopify’s own website, it has over 11,600 employees, but he only recently updated that figure from 10,000 employees, so even laying off 1,000 employees last year doesn’t make much sense. there is not.

In any case, according to Shopify’s latest self-report, today’s news could affect 2,300 employees. The company said the affected person will receive a minimum of 16 weeks of severance pay, plus an additional week for each year he works with Shopify. You will also receive medical benefits for the same period.

“Side Quest”

In today’s blog post, Tobias Lütke mentions “main quests” and “side quests”, the former being the core of the company. reason for existence The best known is e-commerce software for online retailers. However, shipping and logistics have always been closely related to e-commerce. So Shopify has built its business side as well. This is what Lütke calls one of his “side quests.” The one that eventually got in the way of the main business.

“The company needs to split its focus, so side quests are always a distraction,” Lütke says. This can be valuable, especially if engaging in side quests creates the conditions for the main quest to be more successful. It’s often said that the bigger companies move slower, but that’s not because of their size, but because of the side his quests and distractions pile up along the way. This is because large companies can be somewhat inefficient, especially during periods of steady economic boom. But once you have to adapt to a new paradigm, you can’t adapt. They will either be replaced by more focused competitors or collapse completely. “

But while one of Lütke’s reasons for downsizing was to “focus more” on its core product, another reason Shopify might want to go back to basics is the burgeoning AI It also mentions revolution.

“We are heading into a decade of fast and massive change,” said Lütke. “We need speed, agility and a lot of innovation. Technological progress is always towards simplification, and entrepreneurs are more successful with simplification. We are at the dawn of the AI ​​era, and the new capabilities it will unleash are unprecedented, and Shopify says it can be one of the companies most likely to use AI to help their customers. It’s a privilege, co-pilot of entrepreneurship made possible, our main quest asks us to build the best possible right now, but that’s just completely changed is.”

For context, Flexport is a 10-year-old freight and logistics platform that has raised over $2 billion in funding from high-profile investors including Andreessen Horowitz and SoftBank. Shopify itself invested as part of his Flexport Series E round last February, and a few months later Shopify also acquired his logistics startup Deliverr for his $2 billion plus. It’s clear that Shopify has invested heavily in the logistics side of the business, and selling his 13% stake in Flexport seems like a big write-down, at least on the surface.

In fact, Flexport was recently valued at around $8 billion. That means Shopify’s new stake is worth just over $1 billion to him, but that doesn’t include the stake Shopify bought in Flexport’s Series E round 15 months ago.