Shopify to lay off 20% of workforce as Flexport acquires its logistics business

eCommerce solutions company Shopify will sell its logistics business to supply chain management firm Flexport and will lay off about 20% of its staff as it refocuses its efforts, according to the brand in a statement.

In letter from its CEO, Tobias Lütke, that was posted to the company's website, Lütke noted that they were changing the shape of Shopify significantly to pay "unshared attention to [its] mission".

"There are a number of consequences to this, and I don’t want to bury the lede: after today Shopify will be smaller by about 20% and Flexport will buy Shopify Logistics; this means some of you will leave Shopify today," he said. The layoffs are expected to affect over 2,000 of its employees.

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Lütke noted that in the next five minutes from when the letter went out, affected employees would be notified. "There’s no way to make this good news, but we designed a package that will attempt to make it the best possible version of a bad day," he said. 

Employees who have been laid off will receive a minimum of 16 week severance plus a week for every year of tenure at Shopify. Medical benefits and access to its employee assistance program (EAP) will be covered through this same period. 

Lütke wrote that he company will offer outplacement services and will also give those laid off a chance to talk to their leaders and colleagues through Slack which will remain open. 

"My sincere thanks go out to each of you for everything you’ve done for Shopify and our merchants," he said. 

He went on to say that Shopify's main focus is to make commerce simpler, easier, more democratised, more participatory, and more common. " Technological progress always arcs towards simplicity, and entrepreneurs succeed more when we simplify. But now we are at the dawn of the AI era and the new capabilities that are unlocked by that are unprecedented," he said before adding that Shopify has had the privilege of being amongst the companies with the best chances of using AI to help its customers and that a copilot for entrepreneurship is now possible.

"Our main quest demands from us to build the best thing that is now possible, and that has just changed entirely," he said. 

Building logistics infrastructure is a side quest every ecommerce entrepreneur is eventually pulled into because of the way the logistics industry works: a series of disparate players, all focused on different aspects, said Lütke while adding that coordinating every moving part is often a "burden".

"Instead of every merchant individually taking on their own side quest, Shopify decided to accept it on their behalf. We set to work building software addressable logistics that didn’t exist before," he said. "Logistics was clearly a worthwhile side quest for us and started to create the conditions for our main quest to succeed."

As a result, Flexport will buy Shopify Logistics, becoming the preferred logistics partner for Shopify. Flexport is CEO Dave Clark and founder Ryan Petersen. It will be led by Harish Abbott, allowing everything about Shopify Logistics to be more ambitious and global in nature.

"Making the global supply chains efficient and software addressable is Flexport’s main quest and so this is the perfect home for this part of Shopify," he said. 

The news comes months after customer and sales engagement company WATI (which stands for ‘WhatsApp Team Inbox’) brought on board Shopify as an investor.  This marks Shopify’s first venture investment in a startup operating in the Southeast Asia region.

This comes as WATI announced a US$23m series B funding round to scale the team and product and reach more businesses globally. The funding round was led by Tiger Global with participation from existing investors Sequoia Capital India and Southeast Asia, as well as new investors DST Global Partners and Shopify.

This series B comes hot on the heels of a US$8.3m series A round 10 months ago; in total, WATI has raised over US$35M since 2020. WATI enables companies to have scalable, yet personalised, conversations with an easy-to-use customer engagement software that is built on WhatsApp’s Business API. With additional funding, WATI will continually scale the team and invest in the product stack for low-code automation encouraging wider adoption of digital tools. WATI plans aggressive go-to-market plans in emerging markets, such as Latin America and Southeast Asia.

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