By Jinjoo Lee
Etsy has been trying to find new ways to draw more sales on its platform, but creativity might have its limits.
The company, which also owns second-hand clothing marketplace Depop and musical instrument marketplace Reverb, said the volume of sales through its marketplaces declined 4.1% last quarter on the year, more than analysts had anticipated. The decline on the Etsy platform itself was worse, at 6%. For the year, Etsy expects total gross merchandise sales to decline by a low-single digit percentage, which would mark a third year of declines.
Shares jumped anyway following the earnings call. Some of that may have be to do with better-than-expected revenue. Plus, the stock had already baked in a lot of bad news: It was down more than 40% year-to-date through Wednesday and trading at a record-low multiple of earnings.
It has been a tough environment for sellers of discretionary goods, as consumers have become more selective about where they spend money. But it is clear that Etsy is lagging behind other online platforms.
Etsy's share of U.S. web visitors-among a group of ecommerce sellers-has declined sequentially every quarter this year, according to UBS, citing Similarweb data. Discount seller Temu's share has held steady, while AliExpress's share rose. EBay, which is much larger than Etsy, has seen sales volume increase, albeit moderately, over the past year.
On the one hand, Etsy is trying to be a frequently-used marketplace where shoppers start their searches-just as they might on Amazon. But it is also trying to differentiate itself from websites that sell cheap, commoditized goods.
"Our brand stands for special and unique rather than cheap and deals," Chief Financial Officer Rachel Glaser said on the earnings call.
In July, the company introduced new standards where sellers had to specify that items were either made, designed, handpicked or sourced by a seller. So far, these efforts aren't helping generate more sales. Etsy's more recent tweaks are promising for user experience, but it is unclear they will help generate more sales.
In September, Etsy added a score to listings so that buyers could gauge seller quality, such as whether the seller consistently ships on time or charges a fair price for shipping. It also started prioritizing search visibility for listings with domestic shipping prices of $6 or less. The company has also been improving its search algorithm.
Etsy's paid membership program-still in the testing phase-could be more promising, but it is doubtful that many shoppers are so dedicated to buying custom gifts and jewelry that they would pay a monthly fee for free shipping. On average, an active buyer spends about $123 over a year, hardly enough to justify a paid membership.
Etsy's creative potential hasn't peaked. Its sales potential might have.
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(END) Dow Jones Newswires
October 31, 2024 12:01 ET (16:01 GMT)
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