![Shopify Moves To The Edges of Smiling Curve by Cutting Logistics [video]](https://tkcdn.tekedia.com/wp-content/uploads/2023/05/05140628/shopify-3-768x432.jpg "Shopify Moves To The Edges of Smiling Curve by Cutting Logistics [video]")
“We are changing the shape of Shopify significantly today to pay unshared attention to our mission. There are a number of consequences to this, and I don’t want to bury the lede, after today Shopify will be smaller by about 20% and Flexport will buy Shopify Logistics; this means some of you will leave Shopify today….” With that statement, the leader of Shopify unbundled one of the most challenging components of the business. Investors cheered and the shares rose more than 30% since the announcement.
Logistics & broad supply chain is commerce. The problem is evident everyone: not everyone can do it and maintain a good margin. With Shopify Logistics out of the balance sheet, you will see an improved balanced sheet.
If you do not have Alipay (for Alibaba) or AWS (for Amazon), having a full-scaled internal logistics will depress most components of your business.
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Shopify is selling its logistics business to supply chain management firm Flexport and laying off around 20% of its staff as it refocuses on its core e-commerce roots. CEO Tobias Lutke broke the news to employees in a memo Thursday ahead of the company’s earnings report. He referred to the logistics business as a “side quest” which he says is “always distracting because the company has to split focus.” Shopify has been cutting staff since e-commerce growth started slowing last year – previously shedding 10% of its global workforce in July 2022. Shopify shares were up around 25% in early trading. Shopify’s operating loss in the first quarter was $193 million compared to $98 million a year earlier. (LinkedIn News)
In business, partnership does work, and operating at the edges of the smiling curve makes your business more valuable. When you operate at the edges, margins improve unlike staying at the center (see video). Without the logistics component, the marginal cost efficiency of Shopify will improve, and scaling will become faster. Sure, you still need someone to operate at the center to power the ecosystem.
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For anyone to operate at the edges, someone must first operate at the centre, doing the heavy lifting, else no chance.