Etsy Eyes Latin American Expansion With 2nd Acquisition This Month

Global handcrafted and creative goods eCommerce site Etsy will acquire a Brazilian handmade marketplace in a move that expands Etsy’s reach more securely in the Latin American market, which the company said is poised for huge growth.

The Brooklyn-based marketplace said Monday (June 28) it will acquire Elo7 for $217 million in cash. Elo7, which Etsy CEO Josh Silverman called “the ‘Etsy of Brazil,’” has approximately 1.9 million active buyers and 56,000 active sellers, with about 8 million items for sale. Elo7 will continue to be headquartered in Sāo Paulo, Brazil, and will operate as a standalone marketplace run by its existing leadership.

For Etsy, which has 4.7 million active sellers and approximately 100 million items for sale, Elo7 is less about acquiring new customers and more about establishing a foothold in Latin America, which Silverman said is “an underpenetrated eCommerce region where Etsy currently does not have a meaningful customer base.”

Brazil, with a population of over 213 million, is Latin America’s largest eCommerce market, Etsy said. The Latin America eCommerce market overall is expected to reach approximately $29 billion in 2021, and Elo7, as an early-stage business, has “ample room to grow,” Etsy noted, using the U.S.-based company’s scale to drive expansion.

This is Etsy’s second acquisition announcement in less than 30 days. Earlier this month, the marketplace said it would acquire London-based resale marketplace Depop for $1.6 billion in an attempted to reach into the rapidly growing resale sector.

In 2019, Etsy also acquired Reverb, an online marketplace for musical instruments. Following the $275 million transaction, Etsy says it has helped Reverb increase its gross profit margins by 20 percentage points, to 53 percent.

Aligned Businesses

Elo7 CEO Carlos Curioni, who founded the company in 2008, said Etsy “has always been an inspiration and a reference,” and he’s excited to join with the 16-year-old handcraft marketplace giant.

The company runs similarly to Etsy’s two-sided marketplace model, acting as a peer-to-peer marketplace with a capital-light business model; Etsy also noted that Elo7 has a similar anticipated gross margin profile.

Following the close of both the Depop and Elo7 acquisitions, Etsy will operate four similar but distinct businesses, all relying on independent sellers and buyers of various products. Each marketplace will run independently, Etsy said, though Chief Financial Officer Rachel Glaser said the company will connect “key functions across the brands in a way designed to accelerate value creation and make the whole worth more than the sum of its parts.”

Growing The Base

The pandemic boosted Etsy to months of triple-digit growth, boosting its seller base by nearly 70 percent and lifting its revenue by 141 percent to $550 million.

Though the company expects eCommerce to slow — as do most other retailers — Etsy told investors last month that its long-term growth trends are still intact. Glaser noted that by removing the anomaly growth of 2020, its guidance for the current quarter still implies 170 percent growth compared to 2019 and a $2 billion gain in gross merchandise sales from two years ago.

To keep this growth going, Etsy is still looking for ways to keep customers coming back, since only 9 percent of its customer base shopping the marketplace at least six times a year; 52 percent of customers shop only once a year.

Areas of improvement include bolstering the marketplace’s search capabilities and growing video listings on the site, and by some metrics, it appears to be working: In the first three months of the year, Etsy saw 16 million former customers reactivating their accounts after not making a purchase in a year or more.