Shopify announced on Thursday that it would cut its workforce by about 20% and sell its logistics business to Flexport, a supply chain management company.
The Ottawa-based e-commerce company touted the moves as a way to help it focus on its core quest to facilitate commerce.
But achieving that feat also means cutting back on “side quests” that CEO Tobi Lutke described as “always distracting because the company has to divide its attention.”
“Technological progress is always about simplicity, and entrepreneurs are more successful when they simplify. But we are now at the dawn of the age of artificial intelligence and the new capabilities being unlocked by it are unprecedented,” he argued in an open letter announcing the changes.
“Our main quest asks us to build the best thing that is now possible, and that has just completely changed. »
Mr. Lutke’s memo did not quantify how many employees would leave the company, but before Shopify laid off about 1,000 employees last summer, it had about 10,000 employees.
“I recognize the overwhelming impact this decision has on some of you and I did not take this decision lightly,” Lutke wrote.
The proportion of 20% of the remaining workers would represent around 1,800 people.
In February, Shopify President Harley Finkelstein said there were no more staff cuts on the company’s charts.
Mr. Lutke has promised affected employees a severance package of at least 16 weeks, in addition to one week for every year worked at Shopify. Medical coverage and an employee assistance program will also be offered to departing staff during the same period.
Those leaving will also be able to keep their office furniture and, although they will have to return their company laptops, Lutke said Shopify will help them pay for new ones.
Mr. Lutke also explained that the company decided to sell Shopify Logistics to Flexport to help the company become more ambitious and global.
According to the details of the agreement, Shopify will receive shares equivalent to a 13% stake in Flexport and will obtain the possibility of appointing a director to the board of directors of Flexport.
Flexport will become Shopify’s official logistics partner.
The transaction is expected to close in the second quarter of 2023, but is subject to certain conditions and regulatory approval.
Shopify’s announcements came on the sidelines of the company’s most recent financial results release. For its fiscal first quarter, Shopify posted a profit of US$68 million, which compared with a net loss of US$1.4 billion for the same period last year.
Earnings per share were 5 cents US, compared with a loss per share of $1.17 a year earlier.
Revenue for the quarter ended March 31 increased 25% from a year ago to US$1.5 billion.