Etsy Defies eCommerce Peers With Solid Earnings Report (Q2 2022) - eSeller365

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For this quarter, this group represents about 8 million buyers out of a total of 88.
1 million buyers on Etsy.
4 million new buyers and reactivated about 5 million buyers.
1 million buyers, give or take a few million.
Therefore, the relatively flat GMS (General Merchandise Sales) Etsy realized during its second quarter is somewhat remarkable.

Etsy Defies eCommerce Peers With Solid Earnings Report (Q2 2022) - eSeller365

Etsy released its second-quarter earnings report for 2022 yesterday and beat Wall Street expectations in revenue and earnings per share. That runs counter to the negativity we have seen over the past few months coming out from other eCommerce brands such as Amazon, Walmart, Shopify, eBay, and others. When compared with companies such as Amazon or Walmart, Etsy does not need to inventory items, a point Etsy CEO Josh Silverman relished during last night’s earnings call. “I continue to be grateful that our model does not require us to spend billions of dollars buying inventory in advance on the hopes that there will be demand for it when it finally arrives weeks or months later.” But still, inflationary pressures from consumers tightening their financial belts and focusing on purchasing more everyday essential items effects shopping trends. Etsy is not a general goods shopping destination like most of its peers. Therefore, the relatively flat GMS (General Merchandise Sales) Etsy realized during its second quarter is somewhat remarkable. In addition, the Etsy.com marketplace continues to benefit from its pandemic gains as GMS increased 141% on a year over three-year basis (2019 vs 2022). This number does not include Reverb and Elo7, which the company acknowledged have to date performed below financial expectations due to current macroeconomic challenges. While the three-year comparison is impressive, Etsy admitted this number does represent a 6% decline in GMS over the same period last year. However, this decline needs to be viewed in perspective. Etsy is a unique marketplace with a collection of 100 million items not driven by brands and everyday consumables. The backbone of its inventory is produced and sold by solopreneurs and small business sellers. For example, in 2020, when the CDC recommended that fabric masks could help reduce the spread of Covid, sales of cloth masks made by small shop owners on Etsy jumped. In addition, during the height of the Covid pandemic, when people stayed and worked from home, they were also engaged in more home-based activities such as sprucing up their homes or even extensive interior remodeling projects. This was a perfect fit for Etsy as shoppers could find many home and living products on the marketplace, often unique or custom-made specific to their likes and needs. Also, craft supplies skyrocketed as people were stuck at home and looking for something to do and make their own clothes, jewelry, home furnishings, etc. These factors helped to bring more buyers to Etsy and resulted in significant GMS growth for the company during the height of the pandemic. But even as consumer habits shifted and macroeconomic factors impact purchase decisions today, Etsy said that 40% of its second quarter GMS still came from the home and living as well as craft supply categories. So, after a 141% increase over three years, a 6% decline in one year isn’t much of a factor, especially considering how consumer purchases have shifted over this period. What About the Etsy Strike? What strike? There was no mention of the word or action in the earnings call. In early April, activist sellers placed their shops in vacation mode for one week to protest several policy grievances and a 30% selling fee increase Etsy announced in February. These sellers called their action a strike. But it was a protest action, which apparently had no significant impact on the company’s financials or strategic direction. Before the strike, Etsy announced it was beefing up its customer and seller support services, one of the grievances listed by sellers. After the strike, Etsy did appear to partially cave to another demand by strikers demanding the company end its Star Seller program. In June, Etsy announced changes that would make it easier for sellers to stay in the program, but that seemed to fall far short of demand to eliminate the program altogether. Other issues with the Etsy marketplace highlighted by strikers, especially the fee increase, have not changed, nor are they likely to. During the earnings call, Josh Silverman was asked if the fee increase had an effect on the seller base. “We haven’t seen any noticeable change in the seller base that we can track to the change in fees. In fact, I’m happy to report that seller sentiment has rebounded pretty significantly since the fee change went into effect.” In addition, looking at Etsy’s reported seller data, the numbers for the Etsy.com marketplace (excludes Reverb, Elo7, and Depop) stayed relatively steady over the past four quarters. Q3 2021 – 5.2 million Q4 2021 – 5.3 million Q1 2022 – 5.5 million Q2 2022 – 5.3 million And that pretty much sums it up. The strike mostly hurt participating sellers that lost sales that week while Etsy and millions of other sellers continued to march on. At the end of the second quarter, the company’s financials suggest no meaningful negative impact from the strike on Etsy. Other Interesting Bits From the Etsy Earnings Report and Call Etsy continues to invest in international markets focusing on the UK and Germany with plans to ramp up branding again in those countries for the holiday season. 44% of Etsy marketplace GMS in the second quarter of 2022 was from transactions where at least one party (buyer and/or seller) was located outside the United States. This is a nice sounding number, but it would be more interesting to know how the strong dollar has impacted international sales for U.S. sellers. In addition, this year, there have been new regulations in Germany and the EU that have probably resulted in some U.S. sellers suspending international sales (at least to Europe). GMS per active buyer on a rolling 12-month average was $136, slightly down over the previous quarter. The company has a metric for Habitual Buyers. These are buyers that over a rolling 12-month period spend at least $200 and make multiple purchases on Etsy.com. For this quarter, this group represents about 8 million buyers out of a total of 88.1 million buyers on Etsy.com, accounting for 46% of total GMS. While Etsy acknowledged these metrics are slightly down year over year, the numbers are really pretty flat. Looking forward, Etsy continues to improve its on-platform search capabilities so that shoppers see more of the items they are looking for. Since there is no catalog data on Etsy, most queries result in more than 1,000 search results. Etsy now utilizes more than just one search engine, each with its own strengths, and uses the data to provide relevant results to shoppers. This is a work in progress but, today, much better than the original search that relied on keywords in titles. Etsy has also started to selectively roll out video reviews from buyers. This is part of a strategy to use more engaging visual information on the platform, which appears to include expansion into live streaming as well. Starting next week (August 1), Etsy will launch its Etsy Purchase Protection program, which it hopes will bring more buyers to the platform. Annualized, Etsy estimates the program will cost the company $25 million per year and will take some time before the investment will show results in its GMS. In the second quarter of 2022, Etsy added 6.4 million new buyers and reactivated about 5 million buyers. Overall, the Etsy.com marketplace ended the quarter with 88.1 million buyers, give or take a few million. This number has stayed flat over the past year. Again, considering all the macroeconomics in play today, maintaining active buyers at around the same level for the past year seems like a win. To learn more about Etsy’s second-quarter financials, see the following links: Connect With Us And Other Small Business Owners Please head over to our Facebook Group for Small Business Sellers and interact with other small business owners. Follow us on Facebook, Twitter, and LinkedIn to stay up to date with relevant news and business insights for your online business.
The Original Article can be found on eSeller365

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