Canadian e-commerce firm Shopify, which allows small businesses to create custom e-commerce shops, is cutting about 10% of its workforce or nearly 1,000 employees.
In a memo sent to employees Tuesday, Tobias “Tobi” Lütke, the company’s founder and CEO, said job cuts will affect multiple departments including recruiting, support and sales. Explaining the rationale behind decision making, Tobi said the company’s revenue growth has slowed down and its expansion plan, placed during pandemic has not paid off.
“We bet that the channel mix – the share of dollars that travel through e-commerce rather than physical retail – would permanently leap ahead by five or even 10 years” because of the pandemic,” Lutke explained.
It’s now clear that bet didn’t pay off,” he wrote. “What we see now is the mix reverting to roughly where pre-COVID data would have suggested it should be at this point.”
The Ottawa-based company booked a revenue of $1.2 billion for the first quarter of 2022, representing year-over-year growth of 22%. Gross profit grew 14% to $637.6 million in the first quarter of 2022, compared with $558.7 million for the first quarter of 2021.
The number reflects a healthy and stable quarter for Shopify, but Lutke noted that the surge seen during stay-at-home orders is over, putting the growth rate back on the pace it has followed for the past 20 years.
Shopify was among the hottest pandemic stocks in 2020 and 2021 as it saw a surge in both profit and merchants due to more people staying home during the coronavirus pandemic. However, its share have fallen 77 percent so far this year, driven by an economic slowdown and easing of Covid-19 restrictions