‘By end of day’: Shopify cuts 10% of staff, causing shares to plunge

Shares in Shopify have tumbled after the boss revealed he misjudged the growth of the e-commerce sector and now has to lay off 1000 staff.

Canadian e-commerce giant Shopify is cutting about 1000 workers, with the boss writing in an internal email that 10 per cent of the company’s global workforce would be gone by the end of the day.

Demand for Shopify – which helps businesses set up e-commerce websites – skyrocketed during the pandemic but shares have plunged 77 per cent this year.

Shopify chief executive Tobias Lütke explained the lay offs were due to the company having misjudged the growth of the e-commerce sector and that he was “deeply sorry”.

“We bet that the channel mix – the share of dollars that travel through e-commerce rather than physical retail – would permanently leap ahead by 5 or even 10 years,” Mr Lütke wrote in an internal email on Tuesday (local time) that was later published online.

“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.

“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.”

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Shopify has laid off 10 per cent of its global staff after over-estimating how long the Covid-19 pandemic's shopping surge would continue. Picture: Brandon Bell/Getty Images

Shares in Shopify fell 14 per cent to $US31.55 in New York on Tuesday. The Wall Street Journal first reported the job cuts earlier in the day.

Most of the lay offs were in recruiting, support, and sales, Mr Lütke said.

He added that they were also cutting overspecialised and duplicate roles across the company, as well as “some groups that were convenient to have but too far removed from building products”.

“Those affected today will get 16 weeks of severance pay, plus an additional week for every year of tenure at Shopify. We’ll remove any equity cliff, and extend any medical benefits,” he told staff in the email.

Shopify stock fell 14 per cent after the job cuts were revealed. Picture: Bennett Raglin / Getty Images North America / AFP

Mr Lütke said the company would also offer access to career coaching, interviewing support and resume crafting, and could share their details with other companies looking to hire.

“And because every path taken requires some basics, we’ll continue to pay internet costs for the period, the home office furniture we provided is yours now, and while we’ll need to recover our hardware, we’re offering a kickstart allowance that can be used to buy new laptops,” he said.

Shopify’s job cuts are the latest in a wave of lay offs in the tech sector.

Earlier this month Twitter cut 30 per cent of its talent acquisition team, which it said was fewer than 100 staff.

Microsoft also confirmed a “small number” of job cuts.

Meta boss Mark Zuckerberg warned staff the company would be cutting ties with workers that were unable to meet a new performance threshold. Picture: Mandel Ngan / AFP

Last month, Netflix sacked 300 staff as it desperately looked to cut costs following a decline in subscribers. It had already let go roughly 150 staff and dozens more contractors in May.

Meta chief executive Mark Zuckerberg said his company would slow its hiring plans for engineers by at least 30 per cent this year.

Zuckerberg also said Meta would be implementing higher standards for its employees and cutting ties with those who were unable to meet the new performance threshold.

“Realistically, there are probably a bunch of people at the company who shouldn’t be here,” he said in a company-wide Q&A meeting on June 30.