E-commerce platform Shopify fires 20% of employees, sells logistics business
What's the story
Canadian e-commerce platform Shopify has announced it is laying off 20% of its workforce. This is the second time company has decided to fire staffers in 10 months. In the first round, it axed around 1,000 people. The firm has also sold its logistics arm to freight forwarder Flexport. Let's see what led Shopify to this decision.
Context
Why does this story matter?
The past few months have seen technology companies worldwide fire employees due to economic headwinds. Things haven't been any different in the e-commerce space too. Companies like Shopify enjoyed the pandemic boom as customers moved online en masse. However, firms got it wrong when they assumed the pandemic boom would persist. The layoffs are a result of that.
Layoff
The company has fired over 2,000 employees
Shopify's second round of layoffs will affect over 2,000 employees. According to TechCrunch, the actual figure could be in the region of 2,300. Fired employees will get a minimum of 16 months of severance and an additional week for every year at the company. They will also get medical benefits, access to the employee assistance program, and can keep office furniture the company provided.
Official words
The right thing for Shopify but still hard: CEO
"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," Shopify CEO Tobias Lütke wrote in a blog post. "This is one of those times where both right and hard are true at the same time," he added.
Logistics
The logistics arm was acquired by Shopify for $2.1 billion
Shopify Logistics, the company's logistics business, is being sold to appease investors who have been wary about the capital-intensive fulfillment business. Interestingly, Shopify Logistics was previously called Deliverr Inc. and was acquired by Shopify for $2.1 billion less than a year ago. It is now being sold to Flexport in an all-stock deal, which gives Shopify 13% stake in Flexport.
Quarterly
The firm's quarterly revenue beat estimates
Meanwhile, the company's first-quarter results beat Wall Street's estimates. In the quarter that ended on March 31, Shopify recorded a revenue of $1.51 billion. Analysts estimated the firm's revenue to be $1.43 billion. The surprises did not stop there. The company posted an adjusted profit of one cent per share. Comparatively, the street expected a four cent loss.