Shopify to lay off 10% of workforce

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Shopify — once a standout startup and Wall Street darling — saw its stock plunge after announcing it will lay off 10% of its workforce.

CEO Tobi Lutke sent a memo to staffers that admitted the company “misjudged” how long the ecommerce boom brought on by the COVID-19 pandemic would last and hired too many people.

As of Dec. 31, 2021, the company reports having 10,000 employees around the world, meaning potentially 1,500 jobs could be lost. Most of the reductions will be in recruiting, support and sales, though the company said it will eliminate redundancy and duplication in job functions across all departments.

Shopify’s headcount has doubled since 2019 as it saw a surge in new store signups starting in 2020 as the pandemic gripped the world.

However, as the country began returning to normal, the need for online shopping shrank.

Many online stores were likely also forced to close up shop in the face of rising costs due to inflation and increased labor and shipping costs. This likely made it harder for stores to become viable businesses.

Shopify had previously come under fire for an advertising strategy that marketed its platform as an easy way to start a business that triggered signups but then users reported not being able to attract customers (some of this was due to a lack of funds to adequately market the business and sustain the losses many businesses experience when they first start).

These accounts largely ended up being closed, though it isn’t clear if the company was able to make up for the cost of acquiring that customer.

Shopify has yet to report a profit.