Etsy offered stronger-than-expected results when its earnings went public just after the market closed Thursday (Feb. 25) with earnings and revenue both clocking in well above analyst expectations.
Etsy CEO Josh Silverman noted in a call with analysts that consumers shifting to digital and on the hunt for something different are increasingly drawn to Etsy for its robust product assortments especially masks, which have been a powerful category for the online marketplace for much of the last year. Masks made up 4 percent of total gross merchandise in the fourth quarter. That’s a step down from 11 percent in the third quarter and 14 percent in the second quarter.
Moreover, Silverman noted, masks have turned out to be a product that has introduced a lot of consumers to Etsy for the first time, with many coming back for more.
“We’re really pleased by the fact that we are seeing cross-category purchase, and I think that’s really encouraging,” Silverman said. “What we know is that almost anything you want to buy you can buy on Etsy. Fifty percent of people who were mask-only buyers in the third quarter came back and bought a nonmask item in the fourth quarter, which we think is really encouraging. We do like what we see, and honestly during this time of COVID, people have had fewer options, so they’ve turned to us more often and been generally delighted to find a really broad assortment of products.”
Apart from masks, home goods, home furnishings and, recently, wedding connected goods are all making stronger showings. They are all areas in which Etsy sees a tremendous amount of still-to-be-tapped potential in the market as their customer base is expanding. As of this most recent report, Etsy said it attracted 61 million new or reactivated shoppers to its site and recorded nearly 160 percent growth in “habitual buyers.”
And those habitual buyers, Silverman noted, point the direction to success for Etsy going forward in making sure that its recent upsurge in consumer interest remains sustainable beyond the pandemic period. The habitual buyer class has learned how to optimize their experience on Etsy, how to enter just the right search term keyword to get directly to the things they want to buy, how to speak the language of marketers and sellers such that their shopping experience is smooth. The goal is to better optimize Etsy’s search function so that every user has the same friction-free shopping journey the habitual user has built for themselves.
“A big focus for 2021 and beyond is getting great search results when you don’t know the words to describe what it is you are looking for,” Silverman said. “I think a lot of that is in how we create the kind of experience a habitual buyer has for other kinds of buyers so they can see the wonder of Etsy in the way that habitual buyers do. I think there’s a tremendous opportunity for us to make Etsy more accessible to more people.”
Etsy’s future will probably never include selling things like home electronics, he noted, but he said he believes the company can become the shopping destination that any consumer can come to in order to find something they want or need that is a little more specialized and unique than what they can find elsewhere. The search tools Etsy offers need to be as customized as the goods sold.
Etsy reported earnings of $1.08 per share, well ahead of the 59 cents per share expected by analysts. Revenue was also ahead of expectations with $617.4 million instead of $515.6 million expected. Etsy also offered strong guidance and said it expects revenue in the current quarter to be between $513 million and $536 million, way ahead of Wall Street’s forecasted revenue of $381 million. Etsy declined to give guidance for the full year of 2021, citing pandemic-related uncertainty in global markets.
The market liked what it saw out of Etsy’s earnings; the company’s stock price shot up 8 percent in afterhours trading as the results when public.
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