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Shopify is cutting 20% of staff and selling the logistics arm of its business

Shopify CEO Tobi Lutke speaks at Collision conference 2019Shopify CEO Tobi Lutke announced the company is laying off 20% of staff.

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  • Shopify’s CEO Tobi Lütke announced Thursday that the company is cutting 20% of staff. 
  • Fear has been growing among employees over impending layoffs over the last few days. 
  • The company previously laid off 1,000 people in 2022 amid slow growth post-pandemic. 

Shopify’s CEO Tobias Lütke announced early Thursday that the company is cutting 20% of its workforce and selling the majority of its logistics business to supply chain technology company Flexport.

In a note to employees on Thursday, Lütke said: “I recognize the crushing impact this decision has on some of you, and did not make this decision lightly.”

He continued: “This is a consequential and hard week. It’s the right thing for Shopify but it negatively affects many team members who we admire and love working with.

“This is one of those times where both right and hard are true at the same time. My belief is that any enduring company makes a habit of doing the right thing, even if easy outs present themselves. Yet it doesn’t get easier to make a decision like this, and I hope it never does,” he added.

The company did not specify which divisions would be impacted by cuts. Insider reached out for comment but did not immediately hear back. 

Employees have become increasingly concerned about the possibility of layoffs over the past few weeks after several “bursts,” which is a Shopify name for team off-sites, and other events, were canceled. Analysts and insiders had also been expecting a major change to Shopify’s logistics division, Insider reported Wednesday

Shopify is selling its 2022 $2.1 billion acquisition Deliverr and any progress its made on Shopify-operated warehouses for a 13% equity stake in the company — on top of its existing equity from previous investments. 

But 6 River Systems, a warehouse automation and robotics company Shopify purchased in 2019 for $450 million is being sold to UK grocery firm Ocado for an undisclosed sum, according to The Wall Street Journal.

Investors have expressed increasing concern that the logistics effort is an anchor on Shopify’s balance sheet. In his letter to shareholders, Lütke called the entire initiative a “worthwhile side quest.” 

Shopify said Thursday that Flexport will become its official logistics partner.

Lütke’s letter detailing the changes indicated Shopify would be doubling down on finding further uses for AI in e-commerce. 

The layoffs follow a series of quiet firings affecting employees in departments including talent acquisition. In March, Shopify rescinded full-time job offers for a number of former interns who were set to join the company this summer and fall.

Shopify has frequently spoken about its goal to build a more efficient and focused organization amid economic uncertainty. An internal document that was sent to the company’s talent org earlier in 2023 said Shopify would hire fewer people this year. It said it would employ targeted, “unorthodox” strategies to find the “very best people in their respective craft” as it prioritized efficiency.

In March, Shopify announced a new framework that would classify employees as either managers or “crafters,” with the goal of incentivizing more employees to be individual contributors. The company said it expected there would be fewer managers overall under this framework.

There have also been a number of changes in the company’s upper ranks in recent months. In January, CTO Allan Leinwand departed Shopify after just over a year in the role. CEO Tobi Lütke said in an internal post that he would be taking over Leinwand’s responsibilities instead of hiring a new CTO.

Near the end of last year, Shopify brought on former Morgan Stanley investment banker Jeff Hoffmeister as CFO, replacing Amy Shapero, and promoted Kaz Nejatian to COO, taking on a role previously held by Toby Shannan.

Shopify laid off 10% of its workforce — more than 1,000 people — last July. At the time, it said the layoffs were necessary because the company had miscalculated the long-term impact that the pandemic would have on the e-commerce sector. 

If you’re a Shopify employee with a story to share, contact or on the encrypted messaging app Signal at (646) 889-2143 using a nonwork phone.

Read the original article on Business Insider