The encyclopedia · People & Management · People decision · 2022–2023
Shopify bet the pandemic e-commerce boom was permanent — then laid off 3,000 people
CEO Tobi Lütke admitted Shopify had over-hired after Covid-driven growth; two rounds of layoffs followed, eroding trust.
Shopify · 2022-07
What happened
In 2021 and early 2022, Shopify roughly doubled its workforce on the assumption that the pandemic-driven surge in online shopping was a step change rather than a spike. When growth normalised, the company found itself overstaffed.
In July 2022, Shopify cut about 10% of staff, roughly 1,000 roles, with CEO Tobi Lütke telling employees he had bet wrong on e-commerce growth. In May 2023 it cut another 20%, about 2,000 people, this time framing the reduction as a move toward a 'default digital' operating model.
The layoffs were widely criticised for impersonal execution and for the whiplash of rapid hiring followed by rapid cuts. Shopify's later caution on hiring — including a 2025 memo requiring teams to prove AI could not do a job before adding headcount — shows the lasting effect on its people strategy.
Why it happened
- Shopify treated a pandemic demand spike as a permanent structural shift and hired ahead of sustained revenue.
- Workforce planning was not tied to a durable operating model, so when growth slowed the headcount became excess.
- The two layoffs were communicated as strategic pivots rather than corrections, which made the second round feel like a repeat failure.
- The company later institutionalised hiring friction, indicating it no longer trusted its own headcount instincts.
The lesson
Do not hire to a demand peak as if it were the new baseline — workforce plans need a scenario in which the boom ends.
Aftermath
Shopify recovered financially and its stock rebounded, but its people strategy became more conservative, with explicit AI-first headcount rules.
Sources
- Shopify laying off 10 percent of staff — BetaKit
- How Shopify bungled its latest layoffs and made employees feel like NPCs — TechCrunch
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