Things at Etsy are less than picture-perfect these days as the firm finds itself fighting a similar battle to the rest of the non-Amazon retail sector — slowing sales and frustrated investors.
Two years out of a much ballyhooed IPO, the firm has a new CEO at the helm and is facing pressure from those unhappy investors to think more like a retailer and less like a (cash burning) tech startup.
“We’re trying to find the right balance between a tech company and an eCommerce company,” Fred Wilson, a venture capitalist and chairman of Etsy’s board, said in an interview. “Engineering is still critically important, but we don’t need to build technology for technology’s sake.”
The new sheriff in town — CEO Josh Silverman — has been on board since May. The time period has been marked by big spending cuts and a renewed focus on resetting the core marketplace business, which has seen a slowdown in growth over the last four years.
“We have invested too much in building our version of things that already exist in the market,” Mr. Silverman said.
Etsy, according to reports in The Wall Street Journal, has focused on generating revenue through providing add-on services to its merchants like shipping labels and advertising. The problem, according to sources close to the issue, is that Etsy has not prioritized its core marketplace, which only accounts for about half its revenue.
And Etsy needs that revenue figure to go up more sharply. Etsy brought down a $30 million loss last year despite a 33 percent jump in revenue to $365 million. And operating expenses continue to rise quickly — in Q1 2017 operating expense were up 36 percent, and while the latest results aren't out for Q2 till Thursday, the expectation is that this figure will continue to grow.
The critiques have been harsh. Black-and-White Capital LP publicly complained in May about Etsy’s “horrendous search functionality” and its “historical pattern of ill-advised spending.” The firm, along with buyout giant TPG and others, have encouraged Etsy think about selling itself.
Silverman said he is not entirely opposed to a sale, but he has other priorities in play around hitting reset on the business.
“Step one is to have a plan and confidence in the plan, and only then could we weigh any offers,” he said.
That plan has involved staff cuts — 8 percent of Etsy's workforce — and bringing in a new CEO to replace founding CEO Chad Dickerson. Silverman, before taking command at Etsy, was a Skype and eBay executive.
Mr. Silverman is centralizing marketing in international markets and deploying more outside technology as part of his leadership path. The firm also announced it would be cutting another 15 percent of its staff in June. It has also brought on a new chief technology officer, Mike Fisher, the co-founder of consulting firm AKF Partners.
“Driving more visitors to the site, doing a better job of converting those visits to purchases, and getting buyers to come back” are the biggest priorities, Mr. Silverman said. “It doesn’t necessarily mean spending more money.”