In a Twitter thread, a Shopify (TSX: SHOP) employee has broken their non-disclosure agreement (NDA) to shed light on the company’s controversial actions and strategic direction. The thread exposed a series of events starting from the first quarter of 2022 when Shopify promised job security to its staff, only to carry out massive layoffs in July of the same year.
These job cuts, according to the employee, were driven not merely by a CEO’s misguided “bet,” but rather a shift towards replacing full-time employees with cheaper contract labor and an increased reliance on artificial intelligence (AI) support.
Last week, Shopify announced its upcoming launch of an artificial intelligence assistant called “Sidekick” for merchants using its platform, joining the ranks of other tech companies introducing similar features. In a video shared on Twitter, Lutke demonstrated how the “Sidekick” assistant, accessible through a button on Shopify, will be capable of responding to merchant inquiries, providing information on sales trends, and more.
The tweet series further detailed how Shopify has been aggressively embracing AI technology, using it for various purposes, from generating product descriptions to creating virtual sidekicks and developing a new help center AI agent still in beta testing. CEO Tobi Lutke’s public statements on Twitter illustrated his belief that companies can achieve higher revenues with fewer employees, signaling a desire to cut costs and please shareholders.
However, the consequences of this cost-cutting strategy have negatively impacted customer satisfaction. The reduction in staff and the rise of outsourced, cheap contract labor have led to significant delays in customer support, leaving frustrated merchants waiting for hours or even struggling to receive clear answers. Additionally, teams responsible for monitoring fraudulent stores have been overwhelmed, leading to a potential increase in the number of scam businesses on the platform.
The employee’s Twitter thread also raised concerns about the well-being of Shopify’s workforce. Since the layoffs, remaining staff members have reportedly faced increased workloads without proportional compensation or benefits, leading to burnout, anxiety, and stress leave. Despite these issues being brought to leadership’s attention, they were dismissed as “system” problems, and the company’s focus on AI-based solutions appeared to supersede the value once placed on human-driven customer service.
Furthermore, the thread highlighted Shopify’s apparent shift in target market focus. Previously known for supporting small businesses and entrepreneurs, Shopify now seems to prioritize larger players, as its revenue model relies heavily on payment transactions rather than subscription software.
The drastic changes in Shopify’s approach have led both employees and customers to question the company’s integrity and commitment to its original mission of empowering small businesses. Many see the company as straying from its roots, becoming more akin to the corporate giants it once aimed to oppose.
Shopify’s leadership, including President Harley Finkelstein, has assured employees there will be no further layoffs. However, the company’s actions and secretive handling of layoffs under the veil of NDAs have caused employees to doubt these promises.
Despite multiple rounds of layoffs over the last year, management compensation at Shopify appears to have been largely unaffected.
In a regulatory filing made in May, Shopify revealed that Lutke collected just over $20.0 million in total compensation in 2022, on par with the $20.0 million he collected in 2021, and an increase over the $15.1 million he made in 2020.
With public scrutiny growing and concerns over its corporate values and business model mounting, Shopify faces a significant challenge in restoring trust and addressing the impact of its decisions on both employees and customers.
Shopify last traded at $89.91 on the TSX.
Information for this briefing was found via Twitter and the sources mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.