A global e-commerce company called Shopify will lay off 20% of its employees, which is more than 2,000 people. Also, Shopify is giving Flexport about 13% of its shares in exchange for Shopify Logistics.
This announcement comes almost a year after Shopify previously said it would lay off 10% of its workforce, or about 1,000 workers. It also changed how it was run three months ago, which led to the firing of about 600 people.
However, this new choice was made in an effort to deal with some difficulties the business is currently facing. The company’s blog post says that its main goal will be to make shopping simpler, easier, and more accessible to everyone.
In order to do this, the company is cutting down on side tasks and shipping and logistics problems.
This will let Shopify make the best product for the next 10 years, which will be full of big and fast changes and use the next big thing in tech, artificial intelligence (AI).
CEO Tobias Lütke told employees in a blog post, “For the past year, we’ve been getting rid of everything that gets in the way of making the best product.”
This is very important as we move into a decade with a lot of change. We need to be quick, flexible, and have a lot of ideas.
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To impacted employees
Individuals who depart Shopify currently will receive a minimum of 16 weeks of retirement pay and an additional week for each year of service. During the same time period, our employee assistance programme (EAP) and medical benefits will be managed.
We’ll also help you find a new job if you want, and you can keep all the office furniture we give you. We have to get the work laptop back by law, but we’ll help pay for a new one. If you decide to start a business in the future, you will always have free access to the advanced Shopify plan.
Flexport acquires Shopify Logistics
Shopify logistics is one of the side tasks you can do on Shopify. As an e-commerce company, it took on the difficult task of building logistics infrastructure for other e-commerce companies.
However, the e-commerce company has sold Shopify Logistics to Flexport, a freight and logistics platform, making them their preferred logistics partner.
Despite Shopify’s previous investments in logistics through Delivery and Flexport’s Series E round, the sale only granted them a 13% equity interest in Flexport, which, at its current valuation, would be worth a little over $1 billion.
But despite the layoff and the acquisition, there is still some good news. Today, shares of the e-commerce company soared 17.44% in premarket trading to $54.35.
Shopify Q1 growth amidst challenges
Seeking Alpha says that Shopify’s Q1 sales went up by 25.8% to $1.51 billion, and its gross merchandise value went up by 15% to $49.6 billion.Merchant solutions revenue grew 31% to $1.1 billion, thanks to GMV growth and Shopify Payments. Subscription solutions revenue grew 11% to $382 million because more retailers joined the platform.
The monthly regular income went up by 10% to $116 million. The company also said that it had a positive free cash flow of $86 million, which is 6% of its sales. A year ago, it had negative free cash flow. At the end of the quarter, Shopify had $4.9 billion in cash and $3.9 billion in net cash.
After cutting its sales and staff, Spotify plans to focus on its purpose and goals. They think that year-over-year sales will grow at the same rate as in Q1 and that the gross margin percentage will stay the same.
