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Shopify may have overstuffed its cart.

On its quarterly earnings call on Thursday, the e-commerce also-ran announced a mass layoff of 20% of its staff, as well as the sale of its logistics division and warehouse robotics operation. It's a delayed but no less severe hangover from the company's pandemic glory days.

Vertical Disintegration

Let's tip our hat: Shopify dared to come right at the king -- but it never made it across the moat. In February of 2022, amid slowing growth thanks to waning covid cases and shoppers returning to actual stores, company president Harley Finkelstein announced plans to Amazon-ify its business. He laid out an ambitious goal to become an all-in-one e-commerce colossus by building out a sophisticated fulfillment network that could make deliveries to the vast majority of Americans with Prime-like efficiency.

The strategy culminated in the $2.1 billion acquisition of logistics specialist Deliverr almost exactly one year ago. But one trip around the old Gregorian later, and it's clear that competing with Amazon and its massive, decades-old logistics network is easier said than done. In a blog post announcing the moves Thursday, CEO Tobias Lütke likened the once-hyped logistics venture as a mere "side quest" for the e-commerce platform. Make that one expensive side quest:

  • The logistics business is being sold to Flexsport, a decade-old freight and logistics start-up with over $2 billion in funding; Shopify is receiving a 13% stake in Flexport, most recently valued at around $8 billion, as part of the deal. It's also selling its warehouse robotics operation, which largely came from a $450 million acquisition of 6 River Systems in 2019, to British grocery fulfillment company Ocado Group.
  • Thursday's layoffs, which amount to roughly 2,000 employees, marks the second major headcount culling for the company in the past 10 months after another 1,000 or so jobs roles were slashed late last summer. It's a snapback after the company tripled its workforce during the pandemic.

Shopify's share price jumped nearly 24% on the news, with Baird analyst Colin Sebastian writing in a note, "We applaud management for making difficult decisions that set the company up better for long-term success, although this is a significant pivot."

On Second Thought...: Flexport has a much more, shall we say, realistic vision of how it stacks up against Amazon, even when you add in the roughly 50 warehouse and package sorting centers it just scooped up. Instead of being a competitor of the e-commerce kings, CEO Dave Clark, himself a storied Amazon veteran, told The Wall Street Journal that Flexport will be best positioned as "an extension" of the Bezos operation. Beats being an afterthought. Pandemic optimism, meet post-pandemic pragmatism.