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Etsy, which relies on discretionary spending, is expecting a slow start to 2024. In its Q4 earnings report, Etsy—which relies on discretionary spending—said it expects a slow start to 2024.
“Right now is the moment when many consumers are feeling stretched, with low confidence in the economy and less money to spend on discretionary items, but it's a moment that we believe will pass,” CEO Josh Silverman told shareholders in an earnings call on Wednesday.
The e-commerce platform and marketplace expects the first quarter to be its “low point in year over year growth” in gross merchandise sales and revenue. Then in Q2, it expects recent investments in products and marketing to kick in and boost sales.
Those recent efforts include the launch of Gift Mode, a suite of AI-powered features designed to facilitate and encourage gift-giving between users year round. Etsy promoted the mode in its first-ever Super Bowl ad earlier this month and is now banking on it to drive sales.
In its Q4 earnings report, Etsy emphasized that its growth trajectory has remained healthy over the past four years, despite revenue falling slightly in 2022 and 2023.
While its marketplace GMS was down 1.4% YoY, it was up 142% on a four-year basis. That period includes Etsy’s 2020 boom, when GMS popped 100%. This was followed by a 29% jump in 2021, and then two successive years of slight declines, as the pandemic-fueled e-commerce craze subsided and discretionary spending wound down.
The company’s difficulties over the past two years culminated in a restructuring plan it announced in December, which led to the ouster of two executives and a 11% reduction in its workforce.
Size of the prize: In the earnings call, Silverman stressed that “size of the prize” remains massive, noting that the company’s market share in core geographies and categories is currently just 2%. But to secure more of that market, he explained, Etsy has no intention of trying to compete with competitors on their terms.
“Most other players are competing head-to-head to sell the exact same merchandise, focused on selling at $0.02 cheaper or shipping it two hours faster, and this has resulted in the commoditization of the entire experience,” he said. “But that’s just not Etsy.”
He added that buyers historically haven’t thought of Etsy as a place for “everyday purchase needs,” but that the company can still increase frequency and average order value by making the experience as seamless as possible and helping users find items more easily in its marketplace of 100 million items.