Shopify (NYSE:SHOP) — the e-commerce software provider — is cutting 10% (~1,000 workers) of its workforce (WSJ) with most of its cuts in recruiting, support and sales divisions.

What’s the big deal? CEO Tobi Lütke expected e-commerce sales to stay strong post-COVID — but admitted in yesterday’s memo, “It’s now clear that bet didn’t pay off.”

• Growth is back to “where pre-COVID data would have suggested it should be at this point.”
• “Still growing steady, but it wasn’t a meaningful 5-year leap ahead.”

SHOP

fell 14% yesterday, erasing its recent week’s gains. Now the stock is trading below its 2019 levels — despite more than doubling its sales since.

Shopify’s sales grew 22% in the recent quarter, down from 40%+ in recent quarters — and are expected to slow further.

Still growing: E-commerce is now at an estimated 22% of total retail sales — and is expected to hit 27% by 2026. While the broad e-commerce industry is still expected to grow, Shopify’s customers face unique challenges: running an e-commerce business is more difficult.

• For years, e-commerce stores could pour money into then-cheap Facebook ads and watch sales pour in.
• But ads are less effective and more expensive than in past years, and the market is more crowded.

This creates challenges for the majority of Shopify’s customers, who are small to medium-sized businesses.

Watch: Shopify reports earnings this morning before the market opens.