Etsy pursues its "big hairy audacious goal" as e-commerce marketplaces appeal to buyers and sellers alike

During Macy’s upbeat earnings analyst call this week, the retailer alluded to its forthcoming online marketplace initiative with Mirakl. It could be a significant revenue generator for the firm as the popularity of such digital third party curation enterprises grows for both buyers and sellers.

Alongside the Goliaths like Amazon and Alibaba, there are the smaller firms that are providing increasingly lucrative playgrounds for sellers, such as Etsy, which this week turned in some upbeat Q4 numbers selling $4.2 billion of products across the three month period, up 16% year-on-year.

That level of growth enabled CEO Josh Silverman to tell analysts:

In 2019, we laid out a long-term goal to outgrow e-commerce. And you can see that we have done that very substantially. Evidence is mounting through our cohort and brand data that these gains were not transitory. We believe that Etsy offers the world a true alternative to commoditized shopping, that buyers and sellers value this alternative and we are in the early days of expanding our share of wallet. 

He went on:

Etsy enables anyone with a creative idea to start a business and reach a built-in audience of millions of shoppers. We’ve demonstrated our ability to drive more sales and value for our sellers and believe that this represents a fair exchange of value between Etsy and our seller community. We see so much opportunity to continue to raise top-of-mind awareness and consideration for Etsy, among those who already shop on Etsy and those who don’t. We have become a Top 10 marketplace for buyers in several of our core international markets. We are reaching new audiences in the US and we have made significant progress staying more top-of-mind in order to bring existing buyers back more frequently.

Credentials 

Some stats to back up those claims. Etsy now boasts:

• 90 million active buyers
• New buyers grew by 84% in 2021 compared to the pre-pandemic level of 2019. 
• Over half (53%) of all active buyers who made a purchase on the Etsy marketplace in 2020 made another purchase in 2021, while 37% of new buyers in 2020 made a purchase in 2021.
• Neatly half (49%) of active buyers making two or more purchases, up from 48% in 2020 and 41% in 2019.
• Active sellers grew by 28% and more than doubled on a 2-year basis.

But what is what Silverman calls his “big hairy audacious goal” for Etsy? Simple he said:

It’s to make Etsy the starting point for your e-commerce journey. We understand that’s quite a bold goal given that to make that ambition a reality, we must and are competing against the biggest names in e-commerce and all of retail for that matter. But we believe we have a real opportunity to win.

We believe that, unlike most of the rest, we offer something truly different and compelling. We aren’t trying to sell you the exact same commoditized product just $0.02 cheaper or 2 minutes faster. And that’s why for the Etsy marketplace alone, we see a TAM [Total Addressable Market]  of about $2 trillion. We believe there are many more millions of potential buyers around the world who should be shopping on Etsy and so much more opportunity to build the Etsy habit for those who already know and love us.

Over the past 12 months, the firm has invested in new tech to deliver on this vision, he said:

Search and discovery made some big leaps forward in 2021, and we’ve only just begun to make the Etsy marketplace feel more made for you. Leveraging XWalk, we’re continuing to narrow the semantic gap by relying less on listing taxonomy and more on buyer interests. At year-end, our XWalk engine was utilizing over 4 billion data points, a 50% increase from when we launched in the second quarter of last year. This means we can use 16x more real-time data to capture semantic, meaning across our inventory with XWalk than we could with our prior search capabilities. Putting a finer point on it, Etsy search is simply getting better.

It’s important to make Etsy more human in many ways, he argued:

For example, seller videos, which are a very visible example of how we drive human connection and engagement on and off the marketplace, topped 13 million by year’s end. Etsy’s dramatic growth has also necessitated that we invest and improve in many other often less visible ways to connect our 90 million buyers with over five million sellers. We’ve made meaningful improvements in our member support and trust and safety processes with a combination of people and technology to help make these experiences more joyful, safe and streamlined.

For example, in member support, we’ve invested in self-service, better dashboards and education for our sellers so they can more quickly resolve issues without our intervention. And in trust and safety, investments have included expansion of our content moderation team, investing even more deeply in our handmade and counterfeit item efforts and creating a dedicated machine learning engineering team to support these initiatives.

As for what comes next, there is a game plan, he promised:

We’ll be leaning into messaging that reaffirms our belief that Etsy turns shopping into a joyful expression of your taste and your values. We believe it’s possible to achieve our bold ambition based upon the highly differentiated nature of our marketplaces, the clarity of our strategy and the talent of our team. Our ‘Right to Win’ strategy is more relevant than ever, both for Etsy.com and our subsidiary brands. 

He concluded:

In a world that we believe has been forever transformed by the massive adoption of e-commerce, Etsy, too, has been transformed. Marketplaces get better as they get bigger, and we’re now more than 2.5x bigger than we were before the pandemic. We have many millions more buyers who love us and are coming back for more, tens of millions more unique listings from which they can shop. And our core Etsy brand is becoming a household name. And we have a capital-light business model that serves as a flywheel for long-term profitable investment.

While wallet share may shift for a bit to out-of-home endeavors, people still need to buy things. And we believe Etsy is simply a better way to shop. It’s still early days for e-commerce, and it remains our goal to continue to outgrow the broader e-commerce industry on average and over time. It’s a massive opportunity, and we feel extremely well positioned to grab a bigger share.

My take

I’m a big Etsy fan - it’s a marketplace that has delivered on many levels. Much of my Christmas shopping last year was sourced from there and I can’t reasonably come up with any complaint about the service. What comes next for that “big hairy ambition” will be well worth tracking.