In tandem with strong Q1 2023 earnings, ecommerce platform Shopify announced a number of major strategic moves designed to “sharpen its focus on building and scaling the future of commerce,” including the sale of its logistics business to Flexport and job cuts amounting to 20% of the company’s workforce.
Shares of the company surged on the news, which included Q1 GMV gains of 15% year-over-year to $49.6 billion and revenue increases of 25% YoY to $1.5 billion.
Flexport to Become Official Logistics Provider of Shopify
“Shopify finds it useful to talk about the difference between main quests and side quests internally,” said Shopify CEO Tobias Lütke in a letter to employees explaining the changes. “The main quest of the company is its mission, the reason for the company to exist. Side quests are everything else.”
Logistics clearly fell into the “side quest” bucket. After spending years building out a “port to porch” fulfillment network, Shopify is now offloading it to Flexport, where “making the global supply chains efficient and software addressable” is the “main quest,” according to Lütke’s letter. Flexport is headed by Dave Clark who was central to building Amazon‘s famed logistics and fulfillment network.
The sale, which is expected to close in Q2 2023, will include all people, technology and services related to Shopify’s fulfillment operations, including Deliverr, which Shopify acquired in May 2022. The transition will be led by Deliverr Co-founder and CEO Harish Abbott. Shopify will receive stock representing a 13% equity interest in Flexport, on top of its existing equity interest in the company. Following the sale, Flexport will become the official logistics partner for Shopify and the preferred provider for Shop Promise, the company’s delivery guarantee program.
Shopify Job Cuts will Enable ‘Speed, Agility and Innovation’
The company also announced that it was cutting 20% of its workforce, with Lütke saying that staffing levels “were unhealthy, just like it is in much of the tech industry.” He added: “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.”
The company made a number of notable moves toward that aim in Q1, including:
- Launching its modular headless commerce offering, Commerce Components by Shopify;
- Increasing the price of its Basic, Shopify and Advanced plans;
- Debuting a new AI shopping assistant powered by ChatGPT in the Shop app;
- Being named as Intuit’s preferred partner for POS solutions as that company sunsetted its QuickBooks Desktop POS product; and
- Launching Pinterest as an advertising channel for Shopify Audiences in addition to Meta and Google.
In Q2, the company expects revenue to grow at a similar rate to Q1, although those gains will be offset by significant severance costs resulting from the workforce reduction. All departing employees will receive 16 weeks of severance plus an additional week for every year of tenure, as well as access to outplacement services, a replacement laptop and free access to the Advanced Shopify plan in case they “opt to take an entrepreneurial path in future.”
“Shopify’s strong first quarter results demonstrate once again that we’re the go-to solution powering businesses of all sizes, on every surface where they sell,” said Harley Finkelstein, President of Shopify in a statement. “The changes we’re announcing today will ensure we keep pace with the high velocity of change before us, delivering the cutting-edge solutions our customers have come to expect from Shopify.”