Commercetools Lays Off Staff - Headless Commerce Pioneer

Commercetools Navigates Shifting E-commerce Landscape with Restructuring

Commercetools, a provider of APIs for building online storefronts – often described as a “headless commerce” platform – experienced substantial growth a few years prior. This surge was largely attributed to increased online shopping activity following the onset of the COVID-19 pandemic, leading to a valuation of $1.9 billion.

Currently, the dynamics within the e-commerce sector have evolved, and this shift is impacting Commercetools as well.

Layoffs and Executive Changes at Commercetools

Recent reports, verified by TechCrunch, indicate that Commercetools has reduced its workforce over recent weeks. Approximately 10% of staff were affected in layoffs announced on Wednesday, following a period of failing to achieve projected sales growth. Furthermore, the company is undergoing changes in its leadership structure, including the departures of its Chief Revenue Officer and Chief Financial Officer.

The roles previously overseen by the Chief Information Security and Compliance Officer are also being reassigned. CEO Andrew Burton communicated these changes in a memo to the company, a copy of which TechCrunch has reviewed.

“Despite making considerable progress and continuing business expansion, we have not consistently met our ambitious revenue growth objectives over the past several quarters,” Burton stated in the memo. “This situation necessitated a thorough evaluation by myself, the executive team, and the Board to identify areas of underperformance, strengths, and the necessary adjustments to secure a more robust future.”

Restructuring efforts will be concentrated in marketing, sales, and internal operations like HR and finance. Selective staff reductions within customer and product development will also occur, based on performance assessments.

Details on Workforce Reduction and Open Positions

Burton confirmed to TechCrunch that roughly 10% of employees were impacted by Wednesday’s actions, but refrained from disclosing a precise number. An anonymous source revealed to TechCrunch that the layoffs on Wednesday exceeded 70 individuals, and when combined with reductions over several weeks, could represent up to 20% of the total workforce. The company contests the claim of layoffs beyond those announced on Wednesday.

Burton also noted that the company currently has between 25 and 30 open positions it is actively seeking to fill.

A History of Growth and Transition

Commercetools, initially established in Munich, Germany in 2006, operated for several years with limited external funding, raising $30 million before being acquired by retail conglomerate REWE in 2015. By 2019, the company’s revenues were increasing at an annual rate of 110%.

REWE subsequently spun out Commercetools as an independent startup, supported by a $145 million investment from Insight Partners, resulting in a $300 million valuation.

The COVID-19 pandemic spurred significant growth for Commercetools as digital shopping became widespread. Less than three years after the Insight Partners investment, the company secured $140 million in funding led by Accel, achieving a valuation of $1.9 billion.

Leadership Change and IPO Expectations

Dirk Hoerig, the founder of Commercetools, served as CEO until July 2024, when he was succeeded by Burton. Hoerig remains with the company as Chief Innovation Officer and retains a seat on the Board of Directors.

At the time of the leadership transition, the company’s annual recurring revenue was “far beyond” $100 million, and Burton’s appointment was viewed as a potential step towards a public offering, anticipated in either 2025 or 2026. Burton declined to comment on any future IPO plans.

Market Shifts and Competitive Landscape

The memo acknowledges that Commercetools did not meet its growth targets. Furthermore, the broader market has experienced changes. While Commercetools was an early pioneer in the “headless commerce” space – a term coined by Hoerig – numerous competitors have emerged in recent years.

Shopify, initially focused on smaller merchants, has expanded to serve the larger retailers targeted by Commercetools, is a key competitor.

E-commerce growth, while continuing, has slowed compared to the rapid expansion observed between 2020 and 2022. Recent data from the U.S. Census Bureau indicates a 2.7% increase in U.S. retail e-commerce from the third to the fourth quarter of 2024, reaching $308.9 billion and representing 16.4% of total retail sales. eBay also reported modest Q4 sales growth of just 1%.

Burton also highlighted potential impacts from tariffs and their effects on suppliers as a contributing factor.

“Our initial goals were very ambitious and were not adjusted to account for the macroeconomic uncertainties,” Burton explained to TechCrunch.

The Rise of Social Commerce and the Future of E-commerce

Brand-owned storefronts remain a significant component of the e-commerce market, but they now face competition from emerging marketplaces like Temu, Instagram, and TikTok, representing a new form of social commerce. Companies specializing in “headless” solutions – whether for e-commerce, content management, or other areas – must adapt to evolving consumer behaviors and technological advancements, including the impact of artificial intelligence.

The challenge for companies like Commercetools lies in anticipating and preparing for the future of shopping, adapting to changing consumer preferences and emerging platforms.

Memo from Andrew Burton

Subject: Important Update

Hi team,

Over the past few years, we set ambitious goals, anticipating strong market growth. While we’ve made meaningful progress and our business continues to grow, over the last several quarters we haven’t fully achieved our aggressive revenue growth targets. That reality has required me, our executive team, and our Board to take a hard, in-depth look at where we fell short, where we showed strength, and what needs to change to build a stronger future.

As part of this, we made the difficult decision to restructure a few teams, implement targeted reductions in specific areas, and eliminate some roles. This decision is not a reflection on individual commercetoolers, their talent, dedication, or impact, but instead a necessary step to sharpen our focus and re-position commercetools to be in a stronger position to navigate and succeed in this turbulent market.

Many of you have built strong relationships with the colleagues who are leaving today. They have shaped commercetools in ways big and small, and we are truly grateful. We are providing all impacted employees with severance and continued benefits above the market standard. Additionally, we are continuing their access to OpenUp, our online platform offering diverse mental health support resources, to support them in this transition.

I know this is hard news to process. Change brings uncertainty, and we are committed to providing as much clarity, support, and direction as possible. To help answer common questions, we’ve put together an Employee FAQ that outlines key details about the restructuring, resources available, and what’s next.

To give everyone space to reflect, we are giving all employees this Friday, February 28th as a day off.

Your executive leader will meet with your department later today or tomorrow to discuss what this means for you and your team.

What’s Changing

C-level Updates:

• Bruno Teuber (CRO) – Transitioning out of the executive team, staying as an advisor until the end of H1. A new CRO search has started; in the interim, sales will report to me.
• Dan Murphy (CFO) – Transitioning out of the executive team, advising until the end of H1. CFO role will not be backfilled; Finance, Digital Solutions, and Legal will report to Matt Tuel (COO).
• Denis Werner (Chief Information Security & Compliance Officer) – Moving to a compliance-focused role under Dirk Hörig. IT Ops moving to Digital Solutions under Matt Tuel, Information Security moving to Product under Hajo Eichler, and Office Management moving to People under Roxana Dobrescu.

Teams with Significant Restructuring:

• Marketing (including BDRs) – Realignment to focus on enterprise GTM model and sales PODs.
• Sales & Operations – Restructuring to improve sales support and focus on top markets/customers.
• Enablement Functions (Finance, People, etc.) – Consolidating teams for better operational efficiency.
• Other Impacted Areas – Select cuts in Customer and Product Development after reviewing performance and impact.

Change is never easy, but it’s at the core of what we do — helping businesses adapt to new realities. Now, we’re doing the same. In our Company All Hands tomorrow, we will walk through these changes in more detail — the why, what, and how we move forward together — staying true to our belief in adapting boldly to build what’s next.

Andrew

Updated to note that Commercetools disputes the total number of layoffs claimed by a source.