Etsy’s Turnaround Efforts Bear Fruit In Q1 Earnings

As Etsy continues its turnaround efforts to drive more checkout conversions, the eCommerce marketplace reported slightly better-than-expected first-quarter earnings. The company reported first-quarter revenues of nearly $121 million and earnings per share of 10 cents, beating analysts’ estimates of $119.3 million and 5 cents respectively.

The company delivered its third sequential quarter of gross merchandise sales (GMS) acceleration in the first quarter since embarking on its new strategy, delivering a growth rate of nearly 20 percent year over year, but currency was a tailwind and GMS would have been 17.6 percent adjusted for FX. That followed GMS growth of about 18 percent in Q4 of 2017 and more than 13 percent in Q3 of 2017.

Speaking on a post-earnings conference call on Tuesday (May 8), Etsy CEO Josh Silverman was pleased with its “strong progress” over that amount of time through four initiatives: Trust & reliability, search & discovery, seller tools & services and marketing capabilities.

“We believe,” Silverman said, “that the cumulative effect of our recent product enhancements [is] improving the buying and selling experience in a noticeable way and creating a virtuous cycle that will help drive future growth.”

In terms of search & discovery, Etsy is using context-specific ranking (CSR) to generate more relevant search results for its customers. The idea is that when consumers search for a wedding dress, Etsy will show results for actual dresses and not for related items, such as lace or hangers. Silverman said the initiative is off to a good start, but there is more work to be done on the feature.

“These results are encouraging, yet we’re still in the early stages of leveraging our capabilities to their full potential,” Silverman said on the call.

Beyond search results, Etsy has applied CSR to promoted listings to show more relevant ads for buyers and help sellers more effectively use their budgets. This application is important for sellers, as 90 percent of purchases occur on the first few pages of search results, Silverman said.

In terms of marketing, Etsy has made improvements in its search engine optimization (SEO), email marketing and social referrals. And, Silverman added, it launched a landing page framed around Valentine’s Day in the first quarter.

Beyond its landing page efforts, Etsy is looking to help sellers drive sales through new tools. The company launched targeted offers for sellers in April, which allow sellers to send emails or push notifications to consumers who may have interacted with their shops in the past. Following the launch, sellers with an active campaign are seeing a “high return on spend” for the service.

In addition, Etsy also partnered with Square to implement in-person payments for its sellers. The partnership allowed Etsy to retire a homegrown platform that “consumed time and attention from our engineering team,” Silverman said.

In the future, Etsy is placing longer-term bets on technology that is focused on discovery for “less-directed visitors seeking inspiration with the goal of driving increased engagement, time spent and repeat visits.”

Silverman said, “We plan to continue to invest in areas that are less certain but that we believe have high potential in order to help ensure that we have multiple avenues for future growth.”