Shopify sells its logistic business and lays off 20% of the staff

Shopify has announced the sale of its logistics business, Shopify Logistics, including the company it acquired for $2.1 billion less than a year ago, Deliverr, to Flexport for a 13% equity stake. 

In a letter on the platform's blog, CEO Tobias Lütke noted that "Flexport, led by CEO Dave Clark and founder Ryan Petersen, is the best builder and operator in the logistics world. Contributing our work to Flexport, under the leadership of Harish Abbott, allows everything about Shopify Logistics to be more ambitious and global," reiterating that "making global supply chains efficient and software addressable is Flexport's core pursuit, so this is the perfect home for this part of Shopify."

Shopify also sold 6 River Systems, another retail fulfillment automation startup for which it paid $450 million in 2019, to Ocado. Expanding into logistics services as part of Shopify's ambition to support merchants selling on its platform with a one-stop shop.

However, as the Covid-driven e-commerce boom slows and Shopify's revenue growth slows, it's spending on the fulfillment network has come under closer scrutiny by investors, who fear the capital-intensive project could weigh on earnings. Indeed, in an interview with the Reuters news agency, Harley Finkelstein, president of Shopify, noted that "the change in strategy was a result of prioritizing product acceleration." "We can give our merchants great value. Flexport gets tons of new customers to use their amazing product, and we can refocus on what we do best," Finkelstein stressed.

Massive layoffs 

Shopify Inc. also said past Thursday it would cut 20 percent of its workforce, the second major round of layoffs at the e-commerce company in under a year. The layoffs came immediately after the public announcement and impacted multiple roles in the European and APAC regions. 

The official communication was done by CEO Tobi Lutke, who said, "This means some of you will leave Shopify today," told staff in a memo. "I recognize the crushing impact this decision has on some of you and did not make this decision lightly."

Affected employees have already been advised, via email, if they still have a job. Everyone will receive a minimum of 16 weeks severance plus a week for every year they worked at the company.

Shopify slashes at managerial roles

The company appears to be targeting managerial roles for the cuts, as opposed to people who work on the company's software, with Lutke saying in his note to staff that the company had too many of the former.

"The balance of crafter to manager numbers is a tricky one to strike. Too few and you risk misalignment on the most important things; too many add heavy layers of process, approvals, meetings, and… side quests. Our numbers were unhealthy, just like it is in much of the tech industry," he said.

It's the second major round of layoffs at the company in under a year. The company announced last summer that after expanding aggressively during the pandemic, it would lay off 10 percent of its staff, as sales growth on its e-commerce platform was slowing.