Canadian ecommerce company Shopify
In a blog post, co-founder and CEO Tobi Lütke said that Shopify bet on a much higher growth rate in ecommerce adoption than what materialized as the pandemic began to wind down. In 2020, when the company's stock was closing at all-time highs, consumers were shopping online in vast numbers in a sudden shift in demand that Shopify and others had bet would remain permanently. As lockdown restrictions eased in 2021, consumer demand shifted back to traditional retail; while ecommerce demand is still higher than pre-pandemic, it is still off from the levels Shopify had hoped for.
"It's now clear that bet didn't pay off," Lütke said. "Our market share in ecommerce is a lot higher than it is in retail, so this matters. Ultimately, placing this bet was my call to make and I got this wrong. Now, we have to adjust. As a consequence, we have to say goodbye to some of you today and I'm deeply sorry for that."
Shopify laid off 1,000 workers the day of Lütke's blog post, roughly one tenth of the company's total workforce. Workers are being given 16 weeks' severance as well as a number of other benefits, including access to outplacement services and compensation for internet costs during the severance period.
Despite consecutive disappointing quarters, some experts still seem to see some potential for future growth. The stock still has a number of buy ratings despite recent layoffs and a rather disappointing quarterly report (though the wider expert consensus seems to agree on a hold). While far behind the levels that Shopify had hoped for, demand for ecommerce is still on the rise, and Shopify still has a considerable market presence.
The ecommerce giant advised in its latest guidance to expect rogue waters for the rest of the year, noting that integration costs from the acquisition of Deliverr will likely hit in full in Q3.