As part of the agreement, Shopify will receive stock that represents approximately a 13% equity interest in Flexport, “bringing us to a high-teens ownership”, CNBC reported.
Shopify has over 11,600 employees (as of December 31, 2022) and the company last year laid off 1,000 employees working in recruitment, support and sales.
Read CEO Tobi Lutke’s blog post announcing the changes:
Team-
The company has cut nearly 20 per cent of its 11,600-strong workforce after its logistics business was taken over by Flexport.
Tobi Lutke, CEO of Shopify, in a blog post announcing the change:
After Today Shopify Will Be Smaller About 20% and Flexport Will Buy Shopify Logistics; This means that some of you will be leaving Shopify today.
Shopify recently completed the layoff of nearly 1,000 employees.
We’re significantly changing the shape of Shopify today to bring undivided attention to our mission. There are many consequences to this, and I don’t want to bury the lead: Shopify will be short about 20% after today and Flexport will buy Shopify Logistics; This means that some of you will be leaving Shopify today. I recognize the devastating impact of this decision on some of you, and I did not make this decision lightly.
You will get a follow up in the next 5 minutes which will let you know whether you are affected or not. There’s no way to make this good news, but we’ve put together a package that will attempt to make it the best version of a bad day. I’ve included the details below on how we’ll be able to assist you.
our main pursuit
Shopify internally finds it useful to talk about the difference between main searches and side searches. The main pursuit of the company is its mission, the reason for the existence of the company. Side quests are everything else. Side questions are always distracting because the company has to split focus. Sometimes it can be worth it, especially when engaging a side quest creates conditions that can make the main quest more successful.
In the beginning, companies focus a lot as small startups. It’s often said that larger companies tend to slack off, but it’s not because of their size, it’s because of all the side quests and distractions they accumulate along the way. This is because large companies can be somewhat inefficient, especially during periods of steady economic growth. But once they need to adapt to some new paradigm they cannot. They will be replaced by more focused competitors, or collapse outright.
For the past year we have been reducing everything that stands in the way of making the best possible product. This is extremely important, as we are heading into a decade of high velocity and massive change. We will need speed, agility and a lot of innovation.
Shopify’s main pursuit is to make commerce simpler, easier, more democratized, more participatory and more common. I think we have created the best commerce platform in the world for this. Technological progress always leads to simplicity, and entrepreneurs are more successful when we simplify. But we are now at the dawn of the AI era and the new capabilities it unlocks are unprecedented. Shopify is privileged to be among the companies with the best potential for using AI to help our customers. Co-pilot to entrepreneurship is now possible. Our core pursuit demands us to make the best of what is possible now, and that has just completely changed.
shopify logistics
Creating a logistics infrastructure is a side quest every ecommerce entrepreneur is eventually drawn to because of the way the logistics industry works: a range of different players, all focused on different aspects. You work with carefully designed software to run your store. You will use a lot of pen, paper and phone calls to run the logistics. And most of the time your service providers don’t talk to each other. It is your burden to coordinate them to work together.
Instead of letting each merchant discover their own side individually, Shopify decided to accept it on their behalf. We set out to work on building software addressable logistics that didn’t exist before.
Logistics was clearly a worthwhile side quest for us, and began to create the conditions for our main quest to be successful. From the very beginning, we worked with a lot of partners on all aspects of this same problem: warehousing, robotics, transportation, crossdock, freight. We built a solution step by step through software, leases, and M&A deals that could one day be an independent company. Shopify was the perfect place to bootstrap this endeavor from 0 to 1 and we have done just that. The next step is to take what we have and take it from 1 to N as a key search.
Today we’re announcing that Flexport will acquire Shopify Logistics, becoming the preferred logistics partner for Shopify. Flexport, led by CEO Dave Clark and founder Ryan Peterson, is the best builder and operator in the world of logistics. The contribution of our work at Flexport, led by Harish Abbott, allows everything about Shopify Logistics to be more ambitious and global in nature. Making global supply chains efficient and software addressable is a core pursuit of Flexport and therefore the perfect home for this part of Shopify.
manager and craftsman
Shopify thinks of itself as a crafter-focused business company. It is the craftsmen who create the words, bytes, pixels and floating point weights that allow millions of entrepreneurs to build their businesses and millions of buyers transacting on the platform. Craftsmen are experts in their field and can be trusted to be self motivated. We don’t rely on management to be the task master. The role of a craftsman is to bring everything they have to create something uniquely wonderful.
The role of managers is different. Great managers take individuals and turn them into teams, snowplow barriers, remove ambiguity, help crafters do their best and most creative work, and most importantly, make sure that the crafters are happy. Amazing work aligns with the roadmap and is effective for traders.
The Management track and After track are organized separately on Shopify. The balance of post-manager numbers is a tricky one to strike. Too little and you risk misalignment on what matters most, too much and you add overwhelming layers of process, approvals, meetings and… side quests. Our numbers were unhealthy, just like it is in most of the tech industry. One of the fatal consequences of this is that it leads the company to celebrate activities rather than craft driven results. With the right numbers we will focus solely on results and impact.
More fit for purpose Shopify focused on your core search Less scope, less meetings, and more shipping are great features for our merchants.
to those who go today
Everyone will process it in their own way, and it’s hard for everyone, affected or not.
For those leaving us today, you will receive a minimum of 16 weeks of severance plus one week for each year you are at Shopify. Medical benefits and access to our Employee Assistance Program (EAP) will be covered during the same period. We will also provide outplacement services if you want them, all the office furniture we provided is yours to keep. We legally want the work laptop back, but we’ll help pay for a new laptop to replace it. You’ll continue to have free access to the advanced Shopify plan if you choose to pursue an entrepreneurial path in the future.
You will have a chance to talk more about this later today when you meet any of the leaders. We’ll also be keeping Slack and internal email open for everyone today so we can share farewells. My heartiest thanks to all of you for everything you’ve done for Shopify and our merchants.
fit for purpose
This is a consequential and difficult week. This is the right thing for Shopify, but it negatively impacts many of the team members we admire and love working with. This is one of those times where the truth is both true and difficult at the same time. I believe any sustainable company makes it a habit to do the right thing, even when easy ones present themselves. Yet it is never easy to make a decision like this, and I hope it never has to be.
Shopify is stacked with exceptionally talented, merchant obsessed people. Craftsmen flourish in the best environment, given the best techniques and tools with which they can grow and develop their skills. Managers are deeply committed to the craft of management, building incredible teams. Driven tooling and systems will reduce coordination tax. And everyone at Shopify is working on the same, focused core pursuit – our ambition is bigger than ever.
– Toby
CEO Shopify