© Reuters. FILE PHOTO: An employee works at Shopify’s head office in Ottawa, Ontario, Canada, October 22, 2018. REUTERS/Chris Wattie/File Photo
By Chavi Mehta and Tiyashi Datta
(Reuters) – Canada’s Shopify (NYSE:) Inc is laying off 10% of its workforce as the e-commerce company battles slowing growth due to a pullback in online shopping after benefiting from an increase in demand fueled by the pandemic.
Its shares fell 14.7% on U.S. exchanges and on the Toronto Stock Exchange they fell 14% on Tuesday, dragging down Canada’s main stock index. Shares have lost 75% of their value so far in the year.
Shopify’s turn of fortune from Canada’s most valuable company last year to its current struggle to boost sales comes as easing lockdowns have led consumers to return to physical stores .
GRAPH: Shopify down over 75% YTD (https://fingfx.thomsonreuters.com/gfx/mkt/byvrjwaxzve/SHOP.PNG)
Its sales growth during the pandemic led the Ottawa-based company to increase hiring and invest in technology, betting the shift to physical retail stores online would not subside.
“It’s now clear that the bet didn’t pay off,” chief executive Tobi Lütke said in a blog post, adding that roles in recruiting, sales and support are the most affected.
The company had 10,000 employees as of December 31, according to regulatory filings, up from 7,000 at the end of 2020.
“In the end, placing that bet was my call to make and I was wrong.”
GRAPH: Shopify revenue growth over the years (https://graphics.Reuters.com/SHOPIFY-RESULTS/byvrjwdgjve/chart.png)
Facing competition from Amazon (NASDAQ:) and other physical stores, Shopify is now partnering with social media companies such as Twitter (NYSE:) and YouTube as influencers begin selling their own brands.
The 18-year-old company will release its quarterly results on Wednesday, with investors keen to know whether partnerships with social media platforms to tap into the creator economy would be enough to pull it out of a slump.
“One of the bright spots for Shopify is that they’re seeing significant traction in social media-related e-commerce sales,” said DA Davidson analyst Tom Forte.
GRAPH: US consumers buying on social media are expected to increase