Etsy Hits 41M Active Buyers In Q1

With a push to improve search and discovery on its platform, Etsy beat analysts’ earnings estimates for the first quarter, but fell short on top-line revenues. The arts and crafts marketplace reported revenues of $169.3 million and earnings per share of 24 cents compared to analysts’ estimates of $170 million and 14 cents.

The company reported year-over-year gross merchandise sales (GMS) growth of 18.9 percent and revenue growth of 40.1 percent. And active buyers clocked in at approximately 41 million, per an announcement from the company. Etsy also pointed out that active buyers grew by 18.3 percent year over year in Q1, even with a reduction in marketing spend. On an earnings conference call, CEO Josh Silverman said the company had a “solid 2018,” and that this year is off to a “similarly strong start.”

Silverman noted the results are particularly pleasing considering the softness at the beginning of the quarter and the decision to pause some of its marketing channels. Going forward, he sees four strategic imperatives as key to unlocking opportunity in the market – creating a best-in-class search/discovery experience, enabling meaningful human connections, building a trusted brand and capitalizing on a vast global collection of unique items.

With more than 60 million items – and one third of all searches bringing in more than 10,000 items each – Silverman pointed out that even simple searches on the company’s website can bring users an overwhelming array of results: “Our goal is to take Etsy’s vast sea of listings and make it feel more manageable and curated for buyers.” One way to further that aim, he said, is to form a stronger point of view around quality and give more prominence to the selections that represent the best of the platform.

Historically, Etsy’s search engine was optimized for conversion, giving prominence to lower-priced items that converted more often. In practice, that meant it put wedding dress hangers over wedding dresses. By training the algorithm’s focus on price, however, Silverman said the company can solve for gross merchandise sales (GMS). He noted that early successes are encouraging, and he believes Etsy is at the beginning of a fruitful process of elevating its best-value items and sellers.

Localization and Personalization

At the same time, Etsy is creating a more localized experience to welcome buyers and sellers from around the world. In the first quarter, Silverman said there were nice winds from global buyers looking for items in their own markets. He also remarked that small changes can punch above their weight. In the U.K., for instance, the company changed the word “shipping” to “delivery” to follow the local lexicon. “This simple change drove a meaningful increase in conversion,” Silverman said. He also mentioned a major initiative to look at how it indexes inventory in French and German.

The company also sought to improve conversion by bringing shoppers recommendations better suited to their tastes and styles. In the past, Etsy relied on only a subset of data. Now, with cloud capacity, it can start to enrich recommendations on listing pages as well as landing pages. It can also incorporate more information about item views, previously purchased items and items added to buyers’ carts.

To yield a richer and more personalized experience while impacting conversion rates and customer loyalty, Silverman also noted there is a significant runway to improve human connection. In the first quarter, the company made several improvements to its “convo tool” to make it easier for shoppers to message sellers directly from listing and shop pages, while also helping sellers answer more efficiently.

Etsy also educated sellers about the importance of shipping practices as well as prices. The company’s overarching goal for the year is to reset shoppers’ perceptions of shipping on the platform. Silverman also pointed out that Etsy’s transition to the cloud played a role in nearly every product development mentioned during the call. While it is a complex undertaking, he noted that the endeavor is ahead of schedule and the transition is going smoothly.