Mask sales are still strong on Etsy, although they’re cooling as each month goes by. This bridal face mask with sequins is from seller Daniela Tabois.
Continuing to ride a pandemic-driven e-commerce wave, Etsy reported gross merchandise sales of $2.6 billion for the third quarter of 2020. That’s a drop of 2% from Q2 — but still the second-highest quarter of sales in the company’s history.
Nearly 15 million new and reactivated shoppers bought something on the platform this quarter, but Etsy wants even more. The company is putting additional millions into TV ad campaigns in the U.S., U.K. and Germany ahead of an unprecedented holiday season.
“Suddenly you’re hearing Etsy mentioned in the same breath as Amazon, eBay and Target,” Josh Silverman said on the Q3 earnings call, referring to how the company is capturing the zeitgeist.
He called out a tweet from comedian Steve Martin:
I have just discovered Etsy. Goodbye.
— Steve Martin (@SteveMartinToGo) October 12, 2020
The market for masks is cooling. Face masks accounted for $264 million in sales in Q3, down from $346 million in Q2, with notable declines each month.
Back-to-school shopping looked different this year, with “a lot of custom desks and home learning supplies” being ordered, Silverman said. Voting-related accessories and clothing were also in high demand — Silverman and other Etsy team members were also wearing shirts reading “Vote” on the video call.
This fall, Silverman says goods meant for outdoor gatherings are in high demand, such as blankets and firepits. Home furnishings remain the largest category on Etsy, and craft supplies continue to be in huge demand. “Our sellers have also demonstrated tremendous agility. They respond to trends within days,” he said.
This “We Survived 2020” ornament from RusticWoodSlices is one of the handmade items on sale now, and shipping for free, as part of Etsy’s early holiday sale promotion.
Etsy launched personalized search capabilities in the third quarter, meaning that search results are now tailored to what each user has clicked on, favorited, added to their cart or purchased in the past. “It’s showing promising results, not just in terms of conversion rate, but also in terms of repeat purchase rate,” Silverman said.
The personalized search will soon be applied to Etsy Ads, he said, and the personalization allowed Etsy to target select new buyers with a $5 coupon towards their next purchase.
CFO Rachel Glaser said demand for Etsy Ads is far outweighing supply, so sellers were increasing their budgets. Opt-out rates for Offsite Ads remains less than 2%. Etsy has been hiring in this boom time, and ended the quarter with 1,375 employees, up 14% from last year.
Shipping issues have plagued small businesses this year, but Silverman said Etsy has been tweaking its expected delivery date predictions based on real data and now has the feature rolled out to more than 50% of listings.
Heading into the holiday season
Obviously, the fourth quarter is going to play out much differently than normal in a pandemic, but it’s likely to be another record-breaking quarter for Etsy.
“We think that Etsy can play an even larger role in making it feel special and helping you connect to your loved ones even at a time when you need to be more distant,” Silverman said. Etsy’s holiday ad campaign is called “Gift like you mean it,” and will air in the U.S. as well as in the U.K. and Germany, where sales been rising.
Etsy is forecasting Gross Merchandise Sales of $2.7 billion to $3.1 billion in the fourth quarter including musical instrument marketplace Reverb. This would still be a 65% to 85% increase from Q4 of 2019, but less optimistic than the double year-over-year growth Etsy saw in Q2 and Q3. The finance team expected political and pandemic uncertainty to have an adverse effect on sales in Q3, but those headwinds weren’t as powerful as feared.
Silverman reported that October’s sales have been in line with September’s so far, but he speculated that some of it could be early holiday shopping.
In past years, holiday shopping drove total sales in the fourth quarter to outpace the rest of the year. Looking at Etsy’s past four years of quarterly sales, on average, Q4 has spiked 30% to 50% over the rest of the year. It’s this reporter’s opinion that Etsy is being very conservative with its forecast and, barring any additional world catastrophes, is quite certain to have its first $3 billion quarter.
The company isn’t making any predictions about sales next year.
Silverman said: “I think it’s likely that 2021 is also going to be one of the most unusual years in modern history.”