Etsy’s Blockbuster Pandemic Year

The shuttering of in-person retail in many parts of the world was a boon for e-commerce. In a year when e-commerce grew across the board, Etsy’s growth outpaced many of its rivals’.

Etsy reported $10.3 billion in gross merchandise sales (GMS) in 2020, more than double what it had in 2019. Etsy’s total revenue from marketplace fees and services totaled $1.7 billion in 2020, also more than doubling from the previous year.

“We roughly achieved our 2023 aspirations in 2020,” CEO Josh Silverman said on the Q4 2020 earnings call.

Even without masks, whose sales totaled $743 million in 2020, Etsy GMS was up 84% year-over-year. CFO Rachel Glaser reported that 2020’s peak holiday shopping day was Small Business Saturday, with over $50,000 in sales per minute.

Etsy now ranks as the fourth-largest e-commerce destination in the U.S. by monthly visits, Silverman said, and Etsy’s economic output is now comparable to that of the city of Houston.

He reported there were numerous occasions in 2020 where Etsy added more than 1 million new buyers per week, with the total active buyers reaching nearly 82 million. The number of active sellers (including Etsy and Reverb, a music marketplace Etsy acquired in 2019) grew by 64% last year, but sales per seller still rose by 22%. There were more than 87 million items for sale from 4.4 million sellers as of Dec. 31.

“We didn’t pivot to meet the demands of 2020. Rather we doubled down on this strategy which has allowed us to meet the demands in 2020 and we believe will continue to strengthen our business for years to come,” Silverman said. “2020 demonstrated that people are looking to shop their values. They’re looking to put their money where their heart is.”

International markets expanding

International sales accounted for about 36% of GMS on Etsy, about the same as in 2019, but one country stood out.

Sales from the United Kingdom saw growth of 189% year-over-year, outpacing Etsy’s global growth rate. More than 70% of sales within the U.K. were local, meaning happening within the country. The U.K. generated 11.3% of Etsy’s revenue for 2020, the only international country to account for more than 10%. Silverman said sales in Germany, Etsy’s next largest market, also more than doubled in 2020 but did not give specific numbers.

Etsy added India to its list of core markets, which includes the United States, United Kingdom, Germany, Canada, Australia and France. Etsy said it is making “strategic investments” to expand in the Indian market, including machine translation.

Investment increases

As Etsy raked in the cash in 2020, it reinvested much of that revenue in engineering and marketing. Etsy’s ongoing investments in dynamic ranking and semantic search are opening up the potential of personalized targeting, Silverman said.

“Personalization is a very important focus helping people to find things they didn’t even ask for but know it when they see it,” he said. He described combining AI with human curation from the community and the Etsy team — which makes me wonder if they are planning to bring back the now-defunct but once-beloved Treasuries.

Glaser said the opt-out rate for the Offside Ads program introduced in 2020 remains under 2%, and in the second half of 2020, 9% of Etsy’s GMS was subject to an Offsite Ads fee. The company spent more than $500 million on marketing in 2020, up 132.3% over 2019. That includes a hefty amount of TV and digital advertising in core markets as well as targeted digital ads.

2021 and beyond

“In 2021 our focus areas will be centered around things that continue to differentiate the Etsy experience from all of the other players in e-commerce,” Silverman said. “Where the world is racing to offer the same thing priced maybe a little cheaper or shipping just a little faster, Etsy offers something truly unique, something truly special.”

But Etsy’s success is largely thanks to the fact that they’ve expanded past their handmade origins, pushing sellers to offer free shipping and offer installment payments with Klarna in the U.S. With an overburdened postal service struggling to deliver on time during a global pandemic, sellers often got the brunt of complaints from customers when packages were delayed.

“In 2021 we’re going to be very focused on the post-purchase experience,” Silverman said. “As we work to become a habit for buyers, it becomes even more important that they trust us and see Etsy as reliable.”