(SHOP) will lay off approximately 10% of its global staff after making the “wrong” bet on how long the pandemic-fueled surge in online shopping would continue, the CEO of the Canadian e-commerce company announced Tuesday.
The cuts span divisions including recruiting, support and sales, according to CEO Tobi Lutke in a memo to staff, and will take effect by end of day Tuesday. Shopify reported having about 10,000 employees as of the end of 2021.
Shopify, an e-commerce platform that helps businesses sell products online and in retail stores, saw demand for its services “skyrocket” in the early days of the pandemic as “almost all retail shifted online because of shelter-in-place orders,” Lutke said in the memo.
“Before the pandemic, e-commerce growth had been steady and predictable. Was this surge to be a temporary effect or a new normal?” Lutke said.
The company decided to expand rapidly, betting that the shift to e-commerce over physical retail would continue growing at a faster clip. But it didn’t turn out that way.
“It’s now clear that bet didn’t pay off,” Lutke wrote, noting that data indicates consumer online shopping habits are reverting back to “where pre-Covid data would have suggested it should be at this point.”
Lutke said the fault was his. “Ultimately, placing this bet was my call to make and I got this wrong,” Lutke wrote. (A representative for Shopify did not immediately respond to a request for comment about whether there would be any leadership changes as a result.)
Shopify stock plunged nearly 15% in early trading Tuesday. The stock has fallen more than 75% this year alone.
Apart from shifting demand, Shopify has also faced renewed competition from Amazon. The e-commerce giant recently announced it will let third-party merchants offer Prime membership benefits such as free and fast shipping directly to Prime customers through their own online stores rather than solely through Amazon’s platform.
The Shopify layoffs come as a number of tech firms have recently announced plans to cut staff or pull back on hiring amid rising interest rates and inflation and fears for a looming recession.