Shopify Lays Off 10% of Staff as Pandemic Bubble Bursts

Ecommerce platform Shopify has laid off 10% of its global workforce, with its chief executive telling staff in a memo the business made the "wrong bet" on how long a pandemic-fueled surge in online shopping would continue. The Canadian company reported 10,000 employees at the end of 2021 in a securities filing. By the end of the day yesterday, around 1,000 were made redundant. Most of the impacted positions were in recruitment, support and sales. 'Duplicate roles' were also eliminated and it's understood some people in the community team were affected too.Over the last two years, Shopify—which makes tools that allow businesses to sell products online—has expanded rapidly, hedging its bets that the shift to ecommerce over physical retail would continue the meteoric rise kickstarted by the Covid-19 pandemic. CEO Tobi Lütke told staff: "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."In February 2022, the business said it had "doubled" its employee base in 2021 to keep up with its rapid growth, posting revenues of $4.6 billion for 2021; a 57% increase over 2020.However, Lütke conceded this "strategic" gamble had backfired, as bricks and mortar stores reopened and consumers returned to pre-pandemic habits. "What we see now is the mix reverting to roughly where pre-Covid data would have suggested it should be at this point," he said, noting it was "still growing steadily" but not at the rate the company had anticipated. "Our market share in ecommerce is a lot higher than it is in retail, so this matters. 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 told staff. A tough market Shopify, which is due to post its financial results for the most recent quarter today, is offering those who had been laid off 16 weeks of severance, extended medical coverage, career coaching services and a free Shopify account. Shopify Integrates With YouTube’s Commerce Offerings Ecommerce growth is stalling globally. In the UK, recent data from the Office for National Statistics (ONS) found just over a quarter of UK retail sales (26%) took place online in March 2022, reflecting a steady decline from their February 2021 peak (37.1%). That’s the lowest proportion since pre-Covid in February 2020, when 22.7% of sales were online. In the US, Adobe's Price Index report, showed Americans' return to in-person retail experiences had impacted digital sales. Consumers spent $77.8 billion online in April, down $5.28 billion from $83.08 billion in March, representing a month-over-month drop of 6.8%. Shopify joins other firms, like Coinbase and Tesla, which have announced staff cuts in recent weeks, respectively laying off 18% and 10% of their salaried workforces. Twitter, Shopify Reveal Partnership at Cannes Lions