Shopify's CEO Tobi Lütke announced on Thursday that the company is cutting 20% of its workforce and selling the majority of its logistics business to supply chain technology company Flexport. The e-commerce giant previously laid off 1,000 people in 2022 amid slow growth post-pandemic. Employees have been concerned for weeks about the possibility of layoffs after several "bursts" were canceled.
In July 2022, Shopify had already let go of 10% staff following a slowdown in the company's growth after the pandemic. As part of this decision, Shopify will sell its logistics unit to supply chain technology firm Flexport, which includes last-mile delivery startup Deliverr.
The sale marks a reversal for Shopify as it had spent years building out its own logistics and order-fulfillment operations. In February, both companies announced a partnership giving Shopify merchants access to Flexport's freight services including booking international shipments from suppliers to their warehouses.
Flexport has been aggressively hiring ex-Amazon executives; notably bringing Dave Clark onboard as CEO who left his position at Amazon last June. Under Clark's leadership, they've also recruited former Amazon employees such as Parisa Sadrzadeh and Teresa Carlson.
With this acquisition, Flexport aims to take over some 50 warehouses and package sortation centers nationwide and compete with Amazon in offering home-delivery services through U.S e-commerce platform Deliverr. The deal also includes acquiring warehousing automation firm 6 River Systems; effectively ending Shopify’s attempt at creating their own logistics fulfillment operation alongside their email sales technology platform offered to merchants.
Dave Clark joined Flexport last September after spending more than two decades at Amazon where he most recently served as CEO of Worldwide Consumer: “This transaction demonstrates our commitment towards providing innovative solutions that match retailers' needs while keeping up with the ever-changing e-commerce landscape”, said Clark.
Despite these challenges, Shopify managed to exceed Wall Street's revenue projections with $1.51 billion for the period. The company expects a similar year-over-year growth rate in Q1 2023 but has acknowledged difficulties such as slower consumer spending and inflationary pressures, alongside falling retail sales.
Tobi Lütke reassured employees and stakeholders: “We are confident in our ability to adapt and succeed amidst these external factors. Our strategic partnership with Flexport will enable us to focus on core strengths while providing exceptional services for our merchants.” Shopify will retain its Shopify Fulfillment Network app where merchants can manage their logistics processes.