With product and marketing investments along with an arrangement to acquire musical instrument marketplace Reverb, Etsy reported its second-quarter results while raising its full-year guidance for gross merchandise sales (GMS) and revenue growth. The company reported year-over-year GMS growth of 21.4 percent and revenue growth of 36.8 percent.
Etsy CEO Josh Silverman said on a call with analysts on Thursday (August 1) that the company’s product teams delivered strong results in the second quarter. He said the company’s product development strategy is tightly aligned with its rights to win. It has a focus on highlighting unique inventory, improving search and discovery, strengthening human connections and building a trusted brand.
During the quarter, Silverman said the company made meaningful strides in search and discovery. By making the home page more personalized and dynamic, the company lets buyers more easily pick up where they left off on their most recent shopping trips. Etsy also made progress on improving its mobile app as part of what it expects will be a multi-year effort.
Silverman also noted that the second half of the year also includes a “trio of bold new initiatives,” including Etsy ads, the Reverb acquisition and a new free shipping program.
Silverman said Etsy launched a program on July 9 to give sellers the “tools, education and support they need” to offer free shipping to U.S. buyers on orders of $35 or more. He also noted that buyers are much more likely to buy an item with free shipping compared to the same item that has shipping costs broken out separately.
To help sellers make the transition, Etsy created a smart pricing tool that allows them to set up a free shipping guarantee. It also gives sellers the option to incorporate all or part of the shipping costs into the item prices and accordingly edit bulk listings. Silverman noted that products with free shipping guarantees will be prioritized in U.S. search.
Silverman also said internal data suggests that free shipping for buyers in the U.S. “often leads to higher-order values," and that there is potential for higher conversion and frequency from better meeting buyers’ shipping expectations. He noted that seller adoption is “promising” to date, and that there is a plan to actively market free shipping to buyers beginning in September.
The Road Ahead
Later this month, the company will also launch Etsy Ads. Silverman described the offering as “a new unified ad platform” designed to give sellers more opportunity to gain prominence and drive visits and sales. Etsy currently operates two separate paid ad products: its on-site ad offering is promoted listings, while Google Shopping advertises products on Google.
The company also recently announced an agreement to acquire Reverb, which is a privately held marketplace for new, used and vintage music gear. Silverman said the transaction is a great “strategic fit” and aligns with the company’s mission of keeping commerce human. He described the platform as the “Etsy of musical instruments,” and said the company sees tremendous value and potential in the business.
For the second quarter, Etsy reported slightly better-than-expected earnings and fell just short of revenue estimates. The company reported revenues of $181.1 million and earnings per share of 14 cents compared to analyst estimates of $183 million and 13 cents per share, as it looks to the future with investments in product and marketing along with the announced acquisition of Reverb.