Ecommerce company Shopify Inc. laid off 1,000 employees (10% of its global workforce) as it faces slower growth after an increase in online shopping due to the COVID-19 pandemic. Following the announcement, the company’s share price plunged 14%, down 75% in 2022. The company’s revenue increased approximately 16% in the second quarter of 2022 compared to that in Q2 2021. Operating expenditure increased by more than 75%. Shopify reported net loss of $1.2 billion for Q2 2022. After an unexpected quarterly loss, the company intends to reduce spending in lower priority areas and non-core activities amid rising operating costs.
Shift in Consumer Demand
According to the company, with the number of COVID-19 cases declining globally, consumers are withdrawing from online shopping and returning to their old shopping habits. In addition to the decreasing demand, Shopify also faced stiff competition from ecommerce giant Amazon. Recently, Amazon announced that instead of relying entirely on Amazon’s platform, third-party merchants would now be able to provide Prime membership perks such as free and quick shipping directly to Prime consumers through their online stores.
Active Jobs Slowed in Shopify
According to GlobalData, Shopify had 118 active jobs in July 2022, whereas in February 2022, it reported the maximum number of active jobs with 267 postings for job vacancies. For the period January 2022–July 2022, the company registered a 48% decrease in the number of active jobs. The rate of month-over-month growth in vacancies slowed down in March 2022.
A Wave of Layoffs in Tech Companies
The layoffs at Shopify come at a time when a number of tech companies revealed plans to reduce the workforce or scale back hiring due to increasing inflation and interest rates, besides worries about an impending recession. The layoffs at Shopify are among the largest so far in a wave of layoffs that hit the technology companies amid global macroeconomic uncertainties. In June 2022, Netflix Inc. laid off hundreds of employees due to loss of subscribers. Shopify joined the group of companies that have either laid off employees amid the global slowdown, such as Microsoft and Netflix, or those that have reduced hiring, such as Google and Apple.
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