Q1 2024 Summary
Published Feb 18, 2025, 5:24 PM UTC- Expected Growth in the Second Half Due to Strategic Initiatives: Etsy's CEO expressed confidence that the company's initiatives in gifting and quality improvements will lead to growth in the second half of the year. He stated, "It is our current expectation that more likely than not, we would grow in the second half of the year as a result of that." He also mentioned that the team's work is "going to be even more impactful" than the previous year, potentially leading to "accelerated growth in the second half."
- Significant Impact from Product and Engineering Efforts: The product and engineering teams generated an incremental $1.5 billion of Gross Merchandise Sales (GMS) from their work last year. The CEO believes that "the work we're doing this year is going to be even more impactful," indicating strong potential for continued growth driven by internal innovation.
- Enhanced Marketplace Quality Leading to Customer Satisfaction: Etsy is investing in removing non-compliant sellers and improving the quality of its marketplace. The CEO noted that they have taken down "millions of listings and tens of thousands of sellers," which had about a 50 basis point impact but is considered "a great investment in making sure that Etsy is different." This focus on quality is expected to lead to "more satisfied buyers who come back more often" and potentially "lower cost of revenue through lower refunds."
- Etsy is experiencing significant macroeconomic headwinds, particularly in consumer discretionary spending, making growth projections uncertain. Management acknowledges that "it's pretty hard to know how that's going to shape up" and that headwinds could arise if the "consumer discretionary environment gets even more challenged."
- Despite considering themselves a growth company, Etsy has not been growing, and management is cautious about increasing investments, such as in marketing, even though growth has stalled. The CEO mentions, "What I don't think is just spending a lot more is going to be the answer," indicating reluctance to increase spending to stimulate growth.
- Aggressive policy enforcement is impacting GMS, as the removal of millions of listings and tens of thousands of sellers has led to about a 50 basis point headwind to their annualized GMS. This could continue to negatively affect sales.
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GMS Growth Outlook
Q: Will you see GMS growth in the second half?
A: Joshua Silverman expressed optimism that initiatives like gifting and quality improvements will lead to growth in the second half. He expects that more likely than not, they would grow due to these efforts, unless the consumer discretionary environment worsens. ( , , ) -
Competitive Environment and Differentiation
Q: Do you anticipate a more favorable competitive backdrop?
A: Joshua Silverman noted that while Chinese competitors are aggressive, the main issue is that consumers feel pressured and seek deep discounts. Etsy focuses on differentiating itself by emphasizing what makes Etsy special, rather than competing on price. ( ) -
Quality Initiatives and Impact on Margins
Q: Will removing non-compliant sellers improve gross margins?
A: Joshua Silverman acknowledged that focusing on quality by removing sellers with poor practices could improve gross margins due to fewer refunds. They have removed millions of listings and tens of thousands of sellers, resulting in about a 50 basis point headwind to GMS, which they are happy to bear for long-term benefits. ( , , ) -
Marketing Initiatives Effectiveness
Q: What is the impact of brand spending like the Super Bowl ad?
A: Joshua Silverman stated that the Super Bowl ad achieved their goal of raising awareness for Gift Mode, igniting a national conversation. Gifting GMS grew significantly faster than site-wide GMS and was positive in Q1. They will evaluate future big game ads based on strategic needs. ( ) -
Macro Factors Impacting Business
Q: How are macro factors affecting Etsy's growth?
A: Joshua Silverman and Rachel Glaser noted that consumers feel pressured, leading them to seek deep discounts. Despite challenges, higher-income households on Etsy are still growing. They believe their initiatives will position them well as macro conditions improve. ( , , ) -
Upcoming Loyalty Program
Q: Can you share more about the loyalty program?
A: Joshua Silverman said they are on track to launch the loyalty program in beta in the second half of the year, focusing on occasional shoppers to turn them into more loyal buyers. ( ) -
Focus on App Downloads
Q: How will you drive app downloads?
A: Joshua Silverman emphasized that app users generate about 75% more GMS. They plan to promote app benefits, use screen space to encourage downloads, offer app-only features, and close the gap with peers to drive more frequency and lifetime value. ( ) -
Seller Fee and Search Improvement
Q: Is seller growth making search tougher to improve?
A: Joshua Silverman acknowledged that an abundance of sellers can strain search quality. Implementing a $15 fee to set up a shop helps attract committed sellers, improving overall quality. They aim to elevate the best items and suppress lower-quality listings to enhance the buyer experience. ( ) -
Easter and Spring Break Impact
Q: How did Easter affect Q1 results?
A: Joshua Silverman explained that Easter and spring break caused a bigger-than-expected headwind in March and a corresponding tailwind in April due to timing shifts in spending. This only mattered because it fell between Q1 and Q2. ( ) -
Use of Large Language Models in R&D
Q: How are you using large language models?
A: Joshua Silverman shared that large language models aided in developing Gift Mode by generating ideas quickly. They also help with coding productivity, allowing teams to work more efficiently and move faster. ( )