Shopify is laying off 1,000 employees amid shifting retail trends
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The pandemic was supposed to impact consumer habits with the force of a giant asteroid. Instead, it might be something closer to a small rock jumping across the water and causing some ripples. For proof, look no further than Shopify.
The site, which helps companies launch e-commerce portals, is laying off 1,000 employees (around 10% of its workforce), according to an internal memo seen by The Wall Street Journal and confirmed by the company on Tuesday. Leaders blame the return to old buying habits — and themselves.
Shopify has pursued an aggressive growth strategy during the pandemic in hopes of becoming the predominant e-commerce alternative to Amazon. Its workforce has fallen from 1,600 in 2016 to around 10,000 last year, WSJ reports, while its share price exploded around 380% from March 2020 to November 2021 (now down around 80% from its peak). And even as recently as May, the company lost $2.1 billion on a major acquisition for order fulfillment specialists Deliverr.
“We bet the channel mix – the share of dollars flowing through e-commerce rather than brick-and-mortar retail – would make a permanent jump in 5 or even 10 years,” CEO Tobi Lütke wrote in the memo, which Shopify has since released. publicly. But the good times don’t last. And the company is experiencing a rapid cooling after consecutive years of accelerated growth:
- Shopify saw annual revenue jump 86% in 2020 and then another 57% in 2021. But in its first quarter earnings report this year, released in February, revenue only rose 22% in 2021. year on year, while the company recorded a net loss. of $371 million in the quarter after making a profit of $124 million the previous year.
- “It is now clear that [betting on e-commerce growth] didn’t pay off,” Lütke wrote. “What we’re seeing now is that the mix is getting back to about where pre-Covid data would have suggested it should be at this point. Still growing steadily, but it wasn’t a significant 5-year leap.”
Shares of Shopify fell 15% after the news broke on Tuesday, ahead of today’s second-quarter earnings report.
Hitting a Wal: Shopify is far from the only retailer feeling the heat. Blaming fuel and food inflation, Walmart issued its second profit warning in 10 weeks after Monday’s closing bell. Its shares fell 8%, while the broad S&P 500 stock index fell 1%. We’re gonna need a clean up on the driveway… well, maybe on everything the alleys.
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