Consumers’ hesitancy to buy themselves nice things amid ongoing economic challenges is taking a hit on Etsy. Now, the eCommerce marketplace is turning its focus to gifting, where many are still willing to be generous.
The company reported Wednesday (Feb. 21) in its fourth quarter and full year 2023 financial results that consolidated gross merchandise sales fell by 0.7% year over year in the three-month period, even as revenue rose 4.3%.
“Right now is a moment when many consumers are feeling stretched with low confidence in the economy and less money to spend on discretionary items,” Josh Silverman, the eCommerce marketplace’s CEO, told analysts on a call discussing these results. “But it’s a moment that we believe will pass.”
Certainly, many shoppers are cutting back. The PYMNTS Intelligence report “Consumer Inflation Sentiment Report: Consumers Cut Back by Trading Down,” which draws from a survey of more than 2,000 U.S. consumers, reveals that 69% have reduced nonessential spending on retail products specifically because of high inflation, and 41% of retail customers say this has been the most significant change to their shopping habits.
Yet consumers remain willing to splurge when it comes to buying gifts for others. The November report “The Credit Economy: How Consumers Are Approaching Holiday Spending and Travel,” a PYMNTS Intelligence and i2c collaboration, found that spending on gifts would average roughly $1,000 across demographics. Plus, 94% of holiday shoppers said they were taking action to make sure they don’t have to cut back on gifts.
In an effort to capture this opportunity, Etsy is looking to improve the gift-buying experience and tout these initiatives to consumers.
“[We have] innovation planned to improve the predictability of shipping costs for both buyers and sellers, as well as work to improve shipping timeliness — for example, shortening our estimated delivery dates this year by at least two days,” Silverman said. “While we’ve made great progress in both of these areas, we have significantly more room to go to make sure we can meet buyers’ expectations.”
He highlighted the addition of Gift Mode, announced in late January, which leverages artificial intelligence (AI) as well as human expertise to improve product-buying recommendations, enabling consumers to input limited information about the recipient and be presented with curated options.
Overall, the pure-play eCommerce audience has shrunk from its peak. PYMNTS Intelligence’s new study “2024 Global Digital Shopping Index: The Rise of the Click-and-Mortar™ Shopper and What It Means for Merchants,” commissioned by Visa Acceptance Solutions, finds that 29% of consumers across the seven countries surveyed are remote shoppers, using online channels exclusively. This share is down from 34% in 2020.
Plus, for eCommerce companies that are not one of the category’s few leaders, it is getting harder and harder to keep up.
“Almost everyone is losing share to Amazon, Walmart, Temu and Shein,” Silverman said.
However, he contended that, given that these share gains come from essentials, the opportunity remains for other eCommerce players to drive sales in discretionary categories.
Etsy’s adaptation to shifting consumer behavior reflects a strategic pivot towards capturing the enduring sentiment of generosity amid economic uncertainties. As the eCommerce landscape evolves, marked by a decline in pure-play digital shopping and a shift towards consumers shopping with industry giants, Etsy’s focus on enhancing the gifting experience emerges as one possible path to growth.
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