Etsy CEO Josh Silverman Tries Some eBay Moves

Etsy CEO Josh Silverman is trying out some moves that will be familiar to eBay sellers. That can be viewed as a good thing or a bad thing, depending on your perspective. The company published its second-quarter 2018 financial results on Monday, and on a conference call with Wall Street analysts, the CEO shared additional information of interest to sellers.

Silverman and his Chief Financial Officer Rachel Glaser discussed Etsy’s plans for marketing in the second half of the year (including TV commercials, retargeting, Instagram, and Facebook); changes to search; upcoming seller promotions; and information about a brand new offering called Targeted Offers. 

The chief executives led off with the news that Etsy saw 20.4% in GMS growth for the quarter (the value of items sold on its marketplace), and Etsy’s revenue grew 30.2% to $132.4 million – good for sellers, even better for shareholders. 

A spokesperson pointed out it was the fourth consecutive quarter of growth acceleration and said Etsy grew to 2 million active sellers and 35.8 million active buyers around the world.

Note that the fee increase for sellers went into effect *after* the end of the second quarter (Etsy increased commission fees from 3.5% to 5%, inclusive of the cost of shipping, as of July 16). Silverman said, “We believe that by increasing the transaction fee to 5%, we are better positioned to bring more buyers to Etsy, generating more sales, and growing the pie for everyone.”

Areas where Etsy sounded like it was borrowing ideas from eBay:

– Displaying estimated delivery dates; and issuing alerts to sellers whose shipping price appear to be above average. (Both are still being tested.)

– Testing a set of promotions designed to influence seller behavior in key areas – including shipping price. Glaser said shipping prices are higher than people are accustomed to on other sites, up to what she would call egregious, she said. And she said if you’re buying clothing on another site, you know you can return it often times for free, and Etsy is looking to remove some of the friction for buyers in those two areas.

– Working to personalize the search experience. “We believe there’s a great opportunity to do better here,” Silverman said. “We are just beginning.”

– Manipulating the search algorithm to display listings from sellers who are local to shoppers doing the searching. “For the first time, we began to incorporate a buyer’s location as one of the attributes in the machine-learning algorithm used to categorize and rank search results,” Silverman said.

– Testing ways for buyers to create user profiles to build an identity.

Among sellers’ top concerns is always the issue of what marketplaces are doing to bring buyers to the site. On Monday’s call, Glaser revealed that the majority of marketing spend in Q2 was related to paid marketing, primarily Google Product Listing Ads and SEM (search engine marketing). Etsy will expand to additional marketing channels in the second half of the year (TV advertising, retargeting, Instagram, and Facebook).

Etsy also ran some experiments in the second quarter to display user-generated curated collections to shoppers. And Silverman said there was opportunity to increase the average order volume through better cross-sell and upsell. 

Etsy will also make strategic investments in seller shipping promotions.

Silverman explained Targeted Offers – “the idea is, how do we take someone who has already interacted with a seller’s shop, and let that seller reach out to them with a promotion or offer to get them to come back and engage more.” 

He said Targeted Offers is a brand new product and it’s still “early days” – it’s great for buyers, and a way for sellers to take their destiny into their own hands.

The Etsy executives addressed the sales tax issue in the wake of the Supreme Court recently overruling its prior Quill decision. One analyst seemed to suggest Etsy should exploit the challenge sellers faced by monetizing a solution (Etsy has shown how profitable seller services can be). Silverman quashed the idea and said Etsy was working with state and federal legislators, saying better laws were needed.

Silverman told analysts that company morale was high, attrition in the quarter was low, “and the team has a bounce in our step.”

Cludo Reports

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