Distracted Shopify Titanic Recovering from Pandemic Iceberg, Still Trying to Right the Ship
Shopify reported Q1 2023 earnings this morning, kicked their Deliverr Fulfillment arm off the ledge, and slashed 20% of its staff. Shopify management reports that it is trying to change the shape of its business. The current shape is broken and distracted, the new shape I suppose is “fixed” but many questions remain.
There are serious concerns that the “Tobi and Harley show” (which has been getting increasingly distrustful of serious management in particular and outside management specifically in the past 3 years) may have reached the end of its useful life at Shopify, in very much the same way as “what got you here won’t get you there.”
A few details:
Shopify is laying off 20% of its workforce, after laying off 10% last July — clearly not enough in the past.
Shopify is selling Deliverr to Flexport, 6 River Systems to Ocado
Shopify reported solid GMV growth of 15% (on top of 13% in Q3), with revenue up 25% from prior year, though they don’t break out how much is Deliverr.
Shopify losses widened to $193 million or 13% of revenue, up from losses of 11% of revenue in Q4 2022. Shopify expenses have not been going in the right direction, and needed to reset to pre-pandemic breakeven levels. I am optimistic that this level of cuts will allow them to be there.
Subscription solutions revenue continues deceleration. 11% y/y in Q1 vs 14% y/y in Q4. MRR does seem to be accelerating, however. Driven by the growth in Plus and POS Pro.
Witness some of the distractions and miscalculations, some of which continue today:
Buying a robotics company, 6 River Systems
Buying a fulfillment & delivery company, Deliverr
Continued “solo entrepreneur” messaging while simultaneously trying win some of the largest businesses in the world.
What is Shop App?
Continuing insistence on the lack of value driven by professional management (even in today’s news), all the while lamenting the growth of their stock.
Referring to its company vision as main and side quests, like it were playing a video game. Hardly reassuring.
I'll wrap by saying, the most insidious part of Shopify's release this morning is their continued belief and insistence that they can code their way out of this problem: the cult of the crafter. This indicates that Shopify has not yet fully internalized the reasons for its missteps.
The lack of a serious management team. Not necessarily a great place to be.
The big question remains: which of these quests is the main quest?
Behind Door A: Shopify the Enterprise eCommerce software company
Behind Door B: Shopify the Entrepreneurial eCommerce Upstart, Arming the Rebels
Behind Door C: Shopify the payments and financial services business
Tobi and Harley sit in the forest in front of these three doors, patiently waiting for a sign to appear as to which door to pick. It may be time for someone else to choose.
