Shopify to Lay Off 20% of Its Workforce as It Sells Logistics Business to Flexport

Shopify, a Canada-based online retail-services platform that has struggled to gain traction with the physical-delivery business, said it would lay off about 20% of its workforce after selling the operations.

“We are changing the shape of Shopify significantly today to pay unshared attention to our mission,” Chief Executive

Tobi Lutke

wrote in a letter to employees on Thursday. The company’s stock price rose almost 24%, closing at $57.30.

Some Shopify employees on the logistics team will move to Flexport or Ocado while others will be laid off, according to a person familiar with the transactions. Shopify didn’t detail how many employees would be laid off and how many would move to the new companies.

The transactions effectively end Shopify’s attempt to stand up its own logistics-fulfillment operation alongside the e-commerce sales-technology platform it offers merchants. Shopify bought Deliverr for $2.1 billion less than a year ago with plans to combine it with 6 River Systems into a single logistics unit. Shopify acquired 6 River Systems in 2019 for $450 million.

The sale price to Ocado wasn’t disclosed.

Flexport Chief Executive

Dave Clark

said the deal to acquire Shopify’s logistics operation enables the San Francisco-based freight forwarder to offer logistics services and tracking for merchants from Chinese factories through to last-mile delivery to customers’ doorsteps.

Flexport is buying the portfolio in exchange for stock representing about 13% equity in Flexport. It didn’t disclose the value of that stake. The deal brings Shopify’s total interest in Flexport up to the high teens, the companies said.

Mr. Clark, who came to Flexport last year after a long tenure building Amazon’s massive logistics network, said the acquisition includes taking over some 50 warehouses and package-sorting centers nationwide.

“It’s like going back in time to the early days of Amazon,” Mr. Clark said. “When I started at Amazon in 1999, we had just opened our fourth or fifth warehouse. So Flexport is going to start with its 50 really small ones and three big ones here in another month or two, and it sort of feels like we’re starting the journey again, just in a different way.”

Flexport’s acquisition will put the company in competition for retailers’ delivery business with Amazon, which runs one of the biggest networks for e-commerce fulfillment in the world. It is a space that Mr. Clark knows well as the architect of Amazon’s sprawling fulfillment network. 

Mr. Clark joined Flexport in September after a 23-year career at Amazon, where he had most recently been CEO of Worldwide Consumer at the e-commerce giant. In that role, he was one of Amazon’s most senior executives.

Mr. Clark engineered the rapid expansion of the Seattle-based company’s network of hundreds of warehouses, distribution centers and delivery stations in recent years, building it into a logistics operation bigger than companies such as

FedEx.

By the time he resigned, he had more than one million employees in his organization. During his tenure, Mr. Clark spearheaded the launch of Amazon Robotics and expanded Amazon’s logistics operations to include Amazon’s own planes, trailers and last-mile delivery vehicles.

Since joining Flexport, Mr. Clark has brought with him a raft of former Amazon employees, including logistics executive Parisa Sadrzadeh and former Amazon Web Services senior executive

Teresa Carlson.

Mr. Clark said Flexport’s logistics services will allow merchants to handle imports and last-mile delivery through one platform, and enable them to fulfill orders through their own websites and bricks-and-mortar stores as well as through other retailers including Amazon and

Walmart.

Rather than competing with Amazon’s logistics network, “I view it much more as I’d like to be an extension of that network,” Mr. Clark said. 

When Shopify in May 2022 announced its deal to buy Deliverr, industry watchers and some shareholders expressed skepticism about the plan to move more deeply into logistics services. The company had very little experience in warehousing and shipping items at the time. Its shares fell 14.9% the day of the announcement. 

The move also came just as the pandemic-driven boom in e-commerce was fading. Shopify last summer announced it was laying off 10% of its global workforce as revenue slowed. 

Shopify earlier this year said it was stepping up its logistics and services offerings, including by creating an app with Flexport for shippers to book ocean freight and track shipments. Shopify said it would continue to run that app for its merchants to connect with Flexport’s logistics services.

“We’ve been incubating Shopify Logistics now for I guess four or five years or so. And we think that this is just going to further accelerate the product,” said Shopify President

Harley Finkelstein.

“The fact that now [Flexport is] going to take it on entirely and allow our merchants to have this incredible product at huge scale happen faster is, we think is a great match for us.”

Amazon has been focused on Shopify as a competitive threat. In 2020, Amazon created a secret unit within the company dubbed “Project Santos” dedicated to studying the company and copying parts of it, the Journal has reported. 

Project Santos morphed into a service Amazon is offering to ship any company’s e-commerce orders through its fulfillment centers, which typically handle the inventory for sellers on Amazon.com.

—Paul Berger contributed to this article.

Write to Liz Young at liz.young@wsj.com and Dana Mattioli at dana.mattioli@wsj.com

Shopify, a Canada-based online retail-services platform that has struggled to gain traction with the physical-delivery business, said it would lay off about 20% of its workforce after selling the operations.

“We are changing the shape of Shopify significantly today to pay unshared attention to our mission,” Chief Executive

Tobi Lutke

wrote in a letter to employees on Thursday. The company’s stock price rose almost 24%, closing at $57.30.

Some Shopify employees on the logistics team will move to Flexport or Ocado while others will be laid off, according to a person familiar with the transactions. Shopify didn’t detail how many employees would be laid off and how many would move to the new companies.

The transactions effectively end Shopify’s attempt to stand up its own logistics-fulfillment operation alongside the e-commerce sales-technology platform it offers merchants. Shopify bought Deliverr for $2.1 billion less than a year ago with plans to combine it with 6 River Systems into a single logistics unit. Shopify acquired 6 River Systems in 2019 for $450 million.

The sale price to Ocado wasn’t disclosed.

Flexport Chief Executive

Dave Clark

said the deal to acquire Shopify’s logistics operation enables the San Francisco-based freight forwarder to offer logistics services and tracking for merchants from Chinese factories through to last-mile delivery to customers’ doorsteps.

Flexport is buying the portfolio in exchange for stock representing about 13% equity in Flexport. It didn’t disclose the value of that stake. The deal brings Shopify’s total interest in Flexport up to the high teens, the companies said.

Mr. Clark, who came to Flexport last year after a long tenure building Amazon’s massive logistics network, said the acquisition includes taking over some 50 warehouses and package-sorting centers nationwide.

“It’s like going back in time to the early days of Amazon,” Mr. Clark said. “When I started at Amazon in 1999, we had just opened our fourth or fifth warehouse. So Flexport is going to start with its 50 really small ones and three big ones here in another month or two, and it sort of feels like we’re starting the journey again, just in a different way.”

Flexport’s acquisition will put the company in competition for retailers’ delivery business with Amazon, which runs one of the biggest networks for e-commerce fulfillment in the world. It is a space that Mr. Clark knows well as the architect of Amazon’s sprawling fulfillment network. 

Mr. Clark joined Flexport in September after a 23-year career at Amazon, where he had most recently been CEO of Worldwide Consumer at the e-commerce giant. In that role, he was one of Amazon’s most senior executives.

Mr. Clark engineered the rapid expansion of the Seattle-based company’s network of hundreds of warehouses, distribution centers and delivery stations in recent years, building it into a logistics operation bigger than companies such as

FedEx.

By the time he resigned, he had more than one million employees in his organization. During his tenure, Mr. Clark spearheaded the launch of Amazon Robotics and expanded Amazon’s logistics operations to include Amazon’s own planes, trailers and last-mile delivery vehicles.

Since joining Flexport, Mr. Clark has brought with him a raft of former Amazon employees, including logistics executive Parisa Sadrzadeh and former Amazon Web Services senior executive

Teresa Carlson.

Mr. Clark said Flexport’s logistics services will allow merchants to handle imports and last-mile delivery through one platform, and enable them to fulfill orders through their own websites and bricks-and-mortar stores as well as through other retailers including Amazon and

Walmart.

Rather than competing with Amazon’s logistics network, “I view it much more as I’d like to be an extension of that network,” Mr. Clark said. 

When Shopify in May 2022 announced its deal to buy Deliverr, industry watchers and some shareholders expressed skepticism about the plan to move more deeply into logistics services. The company had very little experience in warehousing and shipping items at the time. Its shares fell 14.9% the day of the announcement. 

The move also came just as the pandemic-driven boom in e-commerce was fading. Shopify last summer announced it was laying off 10% of its global workforce as revenue slowed. 

Shopify earlier this year said it was stepping up its logistics and services offerings, including by creating an app with Flexport for shippers to book ocean freight and track shipments. Shopify said it would continue to run that app for its merchants to connect with Flexport’s logistics services.

“We’ve been incubating Shopify Logistics now for I guess four or five years or so. And we think that this is just going to further accelerate the product,” said Shopify President

Harley Finkelstein.

“The fact that now [Flexport is] going to take it on entirely and allow our merchants to have this incredible product at huge scale happen faster is, we think is a great match for us.”

Amazon has been focused on Shopify as a competitive threat. In 2020, Amazon created a secret unit within the company dubbed “Project Santos” dedicated to studying the company and copying parts of it, the Journal has reported. 

Project Santos morphed into a service Amazon is offering to ship any company’s e-commerce orders through its fulfillment centers, which typically handle the inventory for sellers on Amazon.com.

—Paul Berger contributed to this article.

Write to Liz Young at liz.young@wsj.com and Dana Mattioli at dana.mattioli@wsj.com