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Dive Brief:
Etsy’s flagship marketplace continued to struggle in Q2. Gross merchandise sales fell 5.4% year over year to $2.4 billion, and its number of active buyers fell 4.6% to 87.3 million.
The company’s smaller U.K.-based Depop marketplace fared better, with GMS up 35.3% to $249.6 million; U.S. GMS grew 54%.
Overall at the company GMS fell 4.8% to $2.8 billion, while revenue rose 3.8% to $672.7 million. Net income reached $28.8 million, down by $24.2 million compared to last year. The number of active buyers dropped by 3.4% to 93.3 million.
Dive Insight:
Etsy Inc. is working to inject strength into its flagship marketplace as declines in various metrics continued in Q2, and the company is betting that mobile will provide a much-needed boost.
“The app is key to our flywheel,” CEO Joshua Silverman told analysts Wednesday. “Today, it’s not just different than a year ago. It’s markedly better, more intuitive, more inspiring and a lot more browseable, with the introduction of multiple new features you can see by simply opening the app homepage.”
In Q2, GMS on the marketplace’s app outpaced non-app GMS and reached nearly 45% of total GMS, he said.
The company aims to dial down its marketing via linear cable television to about a low single-digit percentage of its U.S. brand media spend and “dramatically” shift to more marketing via streaming platforms, Chief Growth Officer Kruti Patel Goyal said. The company is also turning more to “partnerships and influencers to build awareness and credibility,” she said.
“These efforts go hand-in-hand with our work to build a better app experience,” Goyal said. “So that when we reach buyers, they land on an engaging intuitive shopping experience that both inspires and enables them to browse and explore.”
The company’s once-trailblazing search ranking models are “not the right fit for where the future of personalized shopping experiences are headed,” she also said, citing conversations with newly returned Chief Technology Officer Rafe Colburn.
“So we’re retooling our ranking platform to more effectively leverage capabilities of LLMs in generative AI, allowing us to understand our listings, users and their activity much more deeply as we work to deliver better search results,” Goyal said. “And we’re creating more diverse and engaging recommendations by scoring items across a very broad range of interests and clustering them to capture nonobvious connections to encourage discovery.”
The approach will improve Etsy’s ability to predict and match buyer interest over time, as it has already at Depop, she said.
Goyal underscored the role of sellers as well. Marketplaces from Poshmark to Amazon have adjusted various seller policies in the past several months; in April Etsy added tools for sellers. The site’s fees and other policies have upset sellers in the past, but Goyal told analysts that work to enable sellers is ongoing.
“While most marketplaces push sellers into the background, we have the opportunity to bring sellers to the forefront,” she said. “We’re finding ways to better highlight the sellers behind the items and create more seamless connections between them and buyers throughout the shopping journey, from the listing page to the custom order process and direct conversations.”
Etsy completed the sale of Reverb on June 2; the company acquired the secondhand musical instrument site six years ago.