Shopify to reduce workforce by 20%, sells logistics business to Flexport for 13% equity

Image credits: Business Wire

Shopify revealed today It is laying off 20% of its workforce, affecting more than 2,000 people, and is selling off its logistics business. flexport for nearly 13% in stock.

The news comes about 10 months after Shopify announced it would cut 10% of its workforce — nearly 1,000 people — and follows a trend that has seen many big tech companies engage in several rounds of iterations in response to economic headwinds.

“Side goal”

in Blog post todayTobias Lütke refers to “main missions” and “side missions”, the former being the core of the company raison d’être Which is what they are best known for – e-commerce software for online retailers. However, shipping and logistics always go hand in hand with ecommerce, which is why Shopify has built this aspect of their business as well.

For context, Flexport is a 10-year-old shipping and logistics platform that has raised more than $2 billion in funding from large investors including Andreessen Horowitz and SoftBank. Shopify itself has invested as part of Flexport Fifth round last FebruaryAnd, a few months later, Shopify also acquired logistics startup Deliverr for more than $2 billion. Shopify has clearly been betting big on the logistics side of its business, so selling all that for a 13% equity stake in Flexport seems like a huge write-off, on the surface at least.

In fact, Flexport was recently valued at nearly $8 billion, which means the new Shopify stake would be worth a little more than $1 billion, though that doesn’t include the stake Shopify bought in Flexport’s Series E Round 15 months ago.

In any case, this logistical work is what Lütke refers to as one of the “side missions,” which he says was ultimately a roadblock to its main operations.

“Side tasks are always distracting because the company has to divide the focus,” said Lutke. “Sometimes this can be worth it, especially when being involved in a side mission creates the conditions under which the main mission can become more successful. Initially, as a small startup, companies focus intensely. It is often said Large companies are more sluggish but that’s not because of their size, it’s because of all the side tasks and distractions that pile up along the way.This happens because larger companies can be a bit inefficient, especially during periods of stable economic boom.But once they do they need to adapt. With some new models they can’t. They will be replaced by more focused competitors, or they will collapse completely.”

But while “focusing more” on its core product was one of the reasons Lütke cited for downsizing, he also cited the burgeoning AI revolution as another reason why Shopify might be better off going back to its bread and butter.

“We are entering a decade of high velocity and massive change,” said Lutke. “We’re going to need speed, agility, and a great deal of innovation. Technological progress always steers toward simplicity, and entrepreneurs succeed most when we simplify. But we’re now at the dawn of the age of artificial intelligence, and the new capabilities these capabilities unleash are unprecedented. Shopify has the privilege of being among the companies Which has the best opportunities to use artificial intelligence to help our customers. The co-pilot of entrepreneurship is now possible. Our main quest requires us to build the best thing possible now, and that has completely changed.”

This has become a familiar narrative, and we’ll likely see a lot going forward. Just last week, Dropbox announced a large round of layoffs due to the “era of artificial intelligence in computing,” which CEO Drew Houston said will “completely change the cognitive business.”

It’s hard to tell exactly How many people have been affected by Shopify’s recent round of layoffs, but according to her our website It has more than 11,600 employees, which is just a number Updated from 10,000 employees a few months ago. That headcount surge doesn’t make much sense if it laid off 1,000 employees last year, but a likely answer is that Shopify simply didn’t update the number in the wake of its trio of acquisitions last year, including Deliverr.

According to Shopify’s most recent self-reported numbers, today’s news will likely impact in the region of 2,300 workers. The company says those affected will receive at least 16 weeks of severance pay, plus an additional week for each year served in Shopify. They will also receive medical benefits for the same duration.