Shopify job cuts: what happened?

Shopify recently announced that they'll be cutting 10% of their entire workforce - or 1000 employees. The announcement has clearly caused concern across the industry, so how did the eCommerce giant get to the point where they were forced to make such drastic cuts?

The first thing I'll say is that in my opinion, many reports on this are presenting it in an overly sensational way to get a headline and story views.  The reality of it is that yes, I think Shopify did overreach, and overestimate what any permanent increase in internet-based sales might be post-pandemic, and job losses on a scale like this is never good news.  But when you look at the actual numbers we're talking about here, from the perpsective of Shopify continuing to run their business, there's currently very little to be concerned about.

In today's post, I'll be looking at some facts and figures, and showing why you really don't need to be concerned about the future of your Shopify store.

While most bricks-and-mortar businesses struggled through the pandemic, and many closed entirely, some businesses, primarily online, capitalised on the huge increase in online spending.  Tiktok usage tripled during the pandemic and is now firmly established as a major player in social media.  Zoom was another big winner with meeting participants increasing by a staggering 2900%, and it's now the go-to virtual meeting application for many.  Shopify saw a similarly large increase in use, with triple the number of stores, and employee numbers doubling.

Lockdown offered opportunities to many they probably wouldn't otherwise have had.  Forced to stay at home, with many not being able to work at all, but continuing to be paid most of their regular wage.  So there were large numbers of people who had lots of time on their hands, and actually many also had a better cashflow purely because they weren't having to pay to commute to and from work every day.

People also saw how much online spending had increased, and this presented a prime opportunity to consider starting your own online business in the form of an eCommerce store.  Shopify was in a great position to capitalise on this.  As an eCommerce solution, it's quick and easy to get a store online and ready to sell, and can be done with little or even no technical knowledge.

As a framework that was already well established and presenting itself as a highly accessible, easy to use solution, starting a Shopify store was a no brainer for many people.  So we saw the number of Shopify stores triple, and employees double to support this increase.

In my blog post on how to find success with your eCommerce store, I talk about how internet sales vs total sales rocketed from 22% to 38% during the pandemic.  Lockdown brought with it both disadvantages and benefits, but one major benefit was the opportunity to captilise on the massive increase in online spending.  This increase far outstripped the normal 1.4% year on year growth of internet sales.  It also changed the working landscape forever, and many people wondered if this massive increase in online spending would remain after the pandemic.

Looking back now, we can see that the increase in online spending has largely returned to the level you could have projected from before the pandemic.  It's completely understandable that many people wanted to take advantage of lockdown to start a new eCommerce venture, however the reality is that a multitude of people did the same thing meaning compeitition largely increased inline with opportunity.  Also many people will have been hit with the realities of running an eCommerce strore, quickly realising it wasn't nearly as easy an option as they might have first thought.

Shopify needed to react quickly - they now had triple the number of stores to support and host, and doubling the workforce probably seemed a completely logical thing to do during the pandemic.

The unfortunate reality is that none of us could have predicted how exactly internet sales would be affected as the world returned to normal.  There was a real sense at the time that the increase in online spending would remain permanently, and countless outlets were reporting on how the world would never return to what it was before, and we'd better get used to the 'new normal'.

It's true that the world will be forever changed, but the sum total of change, particularly over the passage of time is not looking like it's going to be huge.  Covid will probably end up being reduced to little more than an interesting footnote in history, much the same as other pandemics have been.

So while the rapid expansion of Shopify during the pandemic was very likely absolutely required for the continued proper functioning of the company, I would argue that from a purely business perspective, reducing the number of employees was perhaps an equally required decision.

The share price reflects that the news hasn't been received well by people, least of all those who no longer have a job, but it doesn't mean that Shopify is going anywhere anytime soon.  We'll see what the the future brings, but eCommerce continues to grow year on year and I'm sure that Shopify will continue to be a key player in the market for a long time to come.

Imagine what a difference it would have made if instead of just reporting on job cuts, the press had also been covering the successes of Shopify.  The fact is that Shopify have grown from 5000 to 9000 employees during the pandemic to today - and that's after the jobs cuts.  That's an 80% increase, and while nobody thinks cutting jobs is a good thing, and Shopify clearly did overestimate permanent growth from the pandemic, the wider picture still shows an unmitigated success.

To my mind, Shopify just made the uncomfortable, but necessary decision to future-proof their business and ensure the ongoing success of the platform as a solid eCommerce option.  The share prices will I'm sure recover, Shopify will continue to be an attractive eCommerce option for many, and perhaps Shopify themselves will have learnt something about making better business decisions in the future.

Thanks for reading, my name is Jon Hussey, founder and lead developer for Developer Connection.  Developer Connection is a service to help store owners connect effectively and easily with quality eCommerce developers from across the UK.  So if you're on the lookout for a high-quality Shopify developer, then check us out.