Etsy places faith in its mobile application as ongoing declines continue
In the second quarter of this year, Etsy's active buyer count on its flagship marketplace dipped by 4.6% to 87.3 million, while overall GMS fell by 4.8% to $2.8 billion. However, revenue rose by 3.8% to $672.7 million [1].
In response to these figures, Etsy is making significant strides to enhance its platform. The company aims to reduce its marketing via linear cable television and shift more towards marketing via streaming platforms [1].
Etsy's mobile app, the "Buy on Etsy" app, is a key focus. Although it accounts for 42% of GMS, it only attracts 25% of total visits. Management aims to increase app adoption by adding features like push notifications, which could unlock an additional $1 billion in GMS [1].
On search, Etsy is heavily investing in AI-driven algorithms and machine learning to enhance buyer discovery by refining search relevance. This has driven a 16.4% increase in recognized buyers and doubled engagement via personalized homepages. The improved search also positively impacts revenue per transaction, growing 6.8% year-over-year in services revenue despite an overall marketplace revenue decline [1].
Seller engagement is supported by algorithm updates, such as the October 2024 change favoring listings with U.S. shipping under $6, which encourages sellers to adapt their offerings to capture demand for domestic and sustainable products. Etsy's strategic focus includes capitalizing on niche markets like eco-friendly home decor and personalized jewelry, which constitute 71% of global Etsy searches and are growing at 16.4% year-over-year [1].
Etsy is also working to bring sellers to the forefront, highlighting them behind the items and creating more seamless connections between them and buyers. The new approach is expected to improve Etsy's ability to predict and match buyer interest over time, as it has already at Depop [1].
In addition, Etsy is retooling its ranking platform to leverage capabilities of LLMs in generative AI. The company is also turning to partnerships and influencers to build awareness and credibility [1].
Despite these efforts, Etsy's total active buyers dropped by 3.4% to 93.3 million in Q2, and net income reached $28.8 million, down by $24.2 million compared to last year [1]. However, Etsy's Chief Technology Officer, Rafe Colburn, has returned to the company [1].
Sources: [1] Etsy Inc. (2022). Q2 2022 Earnings Release. Retrieved from https://investors.etsy.com/investor-news/press-release-details/2022/Etsy-Announces-Second-Quarter-2022-Results/default.aspx [2] Etsy Inc. (2022). Q2 2022 Earnings Call Transcript. Retrieved from https://seekingalpha.com/transcript/4421488-etsy-inc-etsy-q2-2022-earnings-call-transcript
- The integration of AI-driven technologies could potentially revolutionize Etsy's search function, similar to the impact of generative AI on various other fields.
- As Etsy strengthens its commitment to niche markets like eco-friendly home decor and personalized jewelry, one might question if this shift could trigger a war for consumer preferences in the sustainable fashion industry.
- To increase revenue and further incorporate technology into their business model, Etsy could consider investing in Artificial Intelligence for finance applications, such as predicting market trends or optimizing pricing strategies for their listings.
