As part of the agreement, Shopify will receive stock that represents a roughly 13% equity interest in Flexport, “bringing us to a high-teens ownership”, CNBC reported.
Shopify has more than 11,600 employees (as of December 31, 2022) and the company laid off 1,000 employees, working in recruiting, support and sales, last year.
Read CEO Tobi Lütke blog post announcing the changes:
The company has cutting around 20 percent of its 11,600-strong workforce after Flexport takes over its logistics business.
Shopify CEO Tobi Lutke in a blog post announcing the change:
After today Shopify will be smaller by about 20% and Flexport will buy Shopify Logistics; this means some of you will leave Shopify today.
Shopify has only recently finished laying off around 1,000 employees.
We are changing the shape of Shopify significantly today to pay unshared attention to our 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. I recognize the crushing impact this decision has on some of you, and did not make this decision lightly.
In the next 5 minutes you’ll get a follow up that tells you if you are affected. 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. I’ve included details below on how we will support you.
Our main quests
Shopify finds it useful to talk about the difference between main quests and side quests internally. The main quest of the company is its mission, the reason for the company to exist. Side quests are everything else. Side quests are always distracting because the company has to split focus. Sometimes this can be worth it, especially when engaging the side quest creates the conditions by which the main quest can become more successful.
In the beginning, as a small startup, companies are intensely focused. It’s often said that larger companies are more sluggish but this is not because of their size, it’s because of all the side quests and distractions they accumulate along the way. This happens because larger companies can afford to be somewhat inefficient, especially during stable economic boom times. But once they need to adapt to some new paradigm they can’t. They will get replaced by more focused competitors, or collapse outright.
For the past year we’ve been subtracting everything that’s in the way of making the best possible product. This is extremely important, because we are heading into a decade of high velocity and massive change. We will require speed, agility, and a great deal of innovation.
Shopify’s main quest is to make commerce simpler, easier, more democratized, more participatory, and more common. I think that we have built the best commerce platform in the world for that. 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. Shopify has the privilege of being amongst the companies with the best chances of using AI to help our customers. 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.
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. To run your store you work with extremely carefully designed software. To run logistics, you will use pen, paper, and phone calls a lot. And most of the time your service providers don’t talk to each other. Coordinating them to act together is your 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.
Logistics was clearly a worthwhile side quest for us, and started to create the conditions for our main quest to succeed. From the beginning, we worked with lots of partners on all aspects of this same problem: warehouses, robotics, transportation, crossdock, freight. We iteratively built a solution, step by step, through software, leases, and M&A deals, that could be an independent company one day. Shopify was the perfect place to bootstrap this effort from 0 to 1 and we have done this. The next step is to take what we have and take it from 1 to N as a main quest.
Today we are announcing that Flexport will buy Shopify Logistics, becoming the preferred logistics partner for Shopify. Flexport, led by CEO Dave Clark and Founder Ryan Petersen, is the best builder and operator in the world of logistics. Contributing our work to Flexport, under the leadership of Harish Abbott, allows 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.
Managers and Crafters
Shopify thinks of itself as a crafter-centric vocational company. It’s the crafters that cause the words, bytes, pixels, and floating point weights which allow millions of entrepreneurs to build their businesses and hundreds of millions of buyers transacting on the platform. Crafters are experts in their domains and are trusted to be self motivated. We don’t rely on management to be the task masters. The role of a crafter is to bring everything they uniquely have to build something wonderful.
The role of managers is different. Great managers take individuals and turn them into teams, snowplow obstacles, remove ambiguity, help crafters do their best and most creative work and, most importantly, ensure that the wonderful work of crafters aligns with the roadmap and is of impact for merchants.
Management track and crafter tracks are held separately at Shopify. The balance of crafter to manager numbers is a tricky one to strike. Too few and you risk misalignment on the most important things, too many and you add heavy layers of process, approvals, meetings and… side quests. Our numbers were unhealthy, just like it is in much of the tech industry. One of the insidious consequences of this is that it leads to the company increasingly celebrating activities rather than crafter driven outcomes. With the right numbers we’ll fully focus on outcomes and impact.
A more fit for purpose Shopify centered on its main quest has less scope creep, fewer meetings, and more shipping great features for our merchants.
To those leaving today
Everyone will process this 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 severance plus a week for every year of tenure at Shopify. Medical benefits and access to our employee assistance program (EAP) will be covered through this same period. We’ll also offer outplacement services if you want them, all office furniture we provided is yours to keep. We legally need the work laptop back, but we’ll help pay for a new one to replace it. You’ll have continued free access to the advanced Shopify plan should you opt to take an entrepreneurial path in future.
You’ll have a chance to talk more about this when you meet with a leader later today. We will also keep Slack and internal email open today for everyone so we can share farewells. My sincere thanks go out to each of you for everything you’ve done for Shopify and our merchants.
Fit for purpose
This is a consequential and hard week. It’s the right thing for Shopify but it negatively affects many team members who we admire and love working with. This is one of those times where both right and hard are true at the same time. My belief is that any enduring company makes a habit of doing the right thing, even if easy outs present themselves. Yet it doesn’t get easier to make a decision like this, and I hope it never does.
Shopify is stacked with exceptionally talented, merchant obsessed people. Crafters thrive in the best environment, given the best technology and tools with which to grow and develop their skills. Managers are deeply committed to the craft of management, all in on building incredible teams. Inspired tooling and systems will reduce the coordination tax. And everyone at Shopify is pursuing a singular, focused main quest – our ambition is greater than ever.