Artisanal e-commerce marketplace Etsy is at a crossroads as it tries to balance declining gross merchandise sales, falling stock prices and high inflation with the needs of its 7 million sellers.
“After the sharp increase in buyers and spending per buyer during Covid, it appears they have hit a wall,” said Jason Helfstein, managing director of Oppenheimer & Co.
Etsy’s first-quarter results were disappointing: gross merchandise sales, or GMS, fell; its consolidated market revenues remained stable, with year-over-year growth of just 0.8%; and the company’s net profit amounted to $63 million, compared to $74.5 million in the same quarter of the previous year. Shares fell 15% the day after the report was released.
Josh Silverman, CEO of Etsy, attributed the difficult quarter to the continued reduction in consumer discretionary spending.
“It made it harder than expected to bend the curve, which was disappointing,” he said during the company’s earnings conference call.
These challenges stand in stark contrast to Etsy’s performance less than three years ago.
The Covid pandemic brought Etsy new customers and a massive increase in sales; its stock price reached an all-time high of $296.91 on November 24, 2021. GMS grew 106.7% year-over-year in 2020 and an additional 31.2% in 2021.
The number of active users on the Etsy platform has increased by almost 70% since 2019, but purchases have not kept up. In the first quarter, the site had 91.6 million active buyers and 7 million active sellers.
“It appears there were some one-off purchases in 2021 that just didn’t repeat themselves,” Helfstein said.
“The real question is: what is the story of Etsy?” he said.
Artisans point to other long-term changes that they say have altered Etsy’s culture and affected their sales, such as higher transaction fees and programs that push them to pay for ads, offer shipping free or respond to every message within 24 hours.
“They end up with less and less money in a sale, but have to do more and more work, not even in their craft, but just to make their Etsy store work for them,” Chiarra said Lohr, executive director of the Indie Sellers Guild and former Etsy seller.
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