Corteza, Matthew A.

BSIT501

On July 27, 2022, Shopify CEO Tobi Lütke stated it would reduce its staff by 10%. He admitted that the
company grew quickly following the COVID e-commerce boom and overestimated its beneficial
effects. They expected more people to continue making online purchases. The company expected its
share of online transactions to advance by five to ten years. Unfortunately, Lütke admitted that the
projection did not pay off.

As a result, Shopify shares closed their trading day on the Toronto Stock Exchange at $40.69. This
number meant its value dropped by 14%, so the stock is down 74% this year.

Lütke said he would remove people from recruiting, sales, and support. Also, Shopify would remove
“overspecialized and duplicate roles” and others that were “convenient to have but too far removed
from building products.”

Problem Statement: Shopify is facing a significant challenge as indicated by CEO Tobi Lütke's
announcement on July 27, 2022, about a 10% reduction in staff. The company's rapid growth following
the COVID-19 e-commerce boom led to overestimation of the sustained effects of the surge in online
purchases. The projection of a five to ten-year advancement in their share of online transactions did not
materialize as expected, resulting in a 74% decrease in Shopify shares for the year. The company is
grappling with the consequences of this miscalculation, reflected in a drop in stock value and the need
for substantial workforce reduction, particularly in recruiting, sales, support, and roles deemed
"overspecialized and duplicate."

Resolution:

 Strategic Reevaluation: Shopify should conduct a thorough reassessment of its strategic growth
projections and business model. This involves analyzing market trends, consumer behavior, and
competitive landscapes to identify realistic and sustainable growth opportunities.
 Diversification and Innovation: To mitigate reliance on a specific sector, Shopify could invest in
diversifying its product or service offerings. Exploring innovative technologies, expanding into
new markets, or enhancing existing features can contribute to a more resilient business model.
 Employee Retraining and Development: Instead of outright layoffs, consider retraining and
redeploying employees to areas aligned with the company's evolving needs. This approach helps
retain valuable talent, fosters employee loyalty, and ensures that skills are adapted to current
and future demands.
 Cost Optimization: Conduct a comprehensive review of operational expenses and identify areas
where costs can be optimized without compromising essential functions. Streamlining processes
and eliminating redundant roles will contribute to overall cost reduction.
 Communication and Transparency: Open communication from leadership is crucial during times
of change. Shopify should communicate transparently with employees, investors, and other
stakeholders about the company's challenges, strategies for recovery, and commitment to
learning from past mistakes. This can help rebuild trust and confidence in the company's future
prospects.