Shopify, a multinational e-commerce company, will reduce its workforce by 20%, resulting in over 2,000 layoffs. Also, Shopify is selling off its Shopify Logistics division to Flexport for approximately 13% of shares, according to TechCrunch.
This comes almost a year after Shopify’s previous announcement that it would cut down 10% of its workforce, which accounted for roughly 1,000 employees. Three months ago, it also made some organizational changes that saw the layoff of about 600 employees.
This new decision, however, was made in a bid to address some challenges that the company is going through. According to the company’s blog post, it will focus on its main quest to make commerce simpler, easier, and more democratized.
To achieve this, the company is cutting off or reducing everything (side quests) that hinders its mission, including distractions that accumulate (shipping and logistics) as the company grows. This will allow Shopify to build the best possible product for the upcoming decade of high velocity and massive change and even leverage this new hype in the tech industry; AI.
Tobias Lütke, the CEO in the blog post issued to employees said,
For the past year we’ve been subtracting everything that’s in the way of making the best possible product. This is extremely important, because we are heading into a decade of high velocity and massive change. We will require speed, agility, and a great deal of innovation.
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To impacted employees
For those leaving us today, you will receive a minimum of 16 weeks severance plus a week for every year of tenure at Shopify. Medical benefits and access to our employee assistance program (EAP) will be covered through this same period. We’ll also offer outplacement services if you want them, all office furniture we provided is yours to keep. We legally need the work laptop back, but we’ll help pay for a new one to replace it. You’ll have continued free access to the advanced Shopify plan should you opt to take an entrepreneurial path in the future.
Spotify Logistics, a side quest getting acquired by Flexport
Shopify Logistics is one of Shopify’s side quests. As an e-commerce company, it took on the quest to build logistics infrastructure for e-commerce entrepreneurs, which might have seemed like a burden.
However, the e-commerce company has sold Shopify Logistics to Flexport, a freight and logistics platform, making them their preferred logistics partner. Despite Shopify’s previous investments in logistics through Deliverr and Flexport’s Series E round, the sale only granted them a 13% equity interest in Flexport, which, at its current valuation, would be worth a little over $1 billion.
But despite the layoff and the acquisition, there is still some good news. Today, shares of the e-commerce company soared 17.44% in premarket trading to $54.35.
Spotify Q1 growth amidst challenges
According to Seeking Alpha, Shopify reported a 25.8% rise in Q1 revenue to $1.51B, with gross merchandise volume up 15% to $49.6B. Merchant solutions revenue grew 31% to $1.1B, driven by GMV growth and Shopify Payments, while subscription solutions revenue rose 11% to $382M due to more merchants joining the platform.
Monthly recurring revenue increased by 10% to $116M. The company also reported a positive free cash flow of $86M or 6% of revenues, compared to negative free cash flow a year ago. As of the end of the quarter, Shopify had a cash position of $4.9B and a net cash position of $3.9B.
Spotify plans to focus on its mission goals after reducing its workforce and sales. They expect Q2 revenue to grow at a similar rate as Q1 on a year-over-year basis, with gross margin percentage remaining consistent.