Shopify lays off 10% of staff

Shopify is laying off 10 percent of its staff. This comes down to a thousand employees. According to the company, it is due to a decline in customer demand after peak growth during the pandemic.

Shopify is a leading ecommerce platform from Canada housing over 2 million sellers worldwide. Most merchants are from the United States, but the European customer base grew significantly over the past two years.

Fluctuating customer demand

Over the pandemic the ‘demand for Shopify skyrocketed’, writes CEO Tobi Lütke in a company blog post. As a result, Shopify invested in the company, expecting ecommerce to leap ahead 5 to 10 years.

“This bet was my call to make and I got this wrong.”

However, customer demand is now returning to pre-pandemic levels: “Still growing steadily, but it wasn’t a meaningful 5-year leap ahead,” Lütke says. Shopify added the graph below to illustrate this.

Lütke: “Ultimately, placing this bet was my call to make and I got this wrong. Now, we have to adjust. As a consequence, we have to say goodbye to some of you today and I’m deeply sorry for that.”

Shopify one of many companies cutting costs

The most affected staff are those in recruiting, support and sales, the CEO writes, as well as ‘over-specialized and duplicate roles’. Shopify is one of many tech companies cutting costs through layoffs recently, such as payment service Klarna. Due to inflation the stock market is in flux, leading to cooled off investor interest. Undoubtedly this also affects the leading ecommerce platform.

European ecommerce growth slowing down

Ecommerce peaked in 2020. Likewise, Shopify saw significant growth between 2020 and 2022. The number of Shopify stores even tripled, most notably in European countries like the United Kingdom and France.

Shopify stores increased significantly in the UK and France.

While ecommerce in Europe peaked in 2020, growth is slowing down in the coming years according to recent numbers. In addition to physical stores being open again, consumer confidence and purchases are declining due to the global economic situation. It seems to be a so-called perfect storm for tech companies in the ecommerce industry.