Etsy just released its financial results for 2019's third quarter (July to September) - here are the highlights:

  • marketplace sales up 30.1% to $1.2 billion - but note that these sales include sales on Reverb, the site they bought earlier this year. Reverb's GMS was $76.9 million.
  • Etsy's revenue was up 31.6%, to almost $198 million
  • gross profit was up 24.7% to $129.0 million
  • Etsy's net income was $14.8 million 
  • revenue from the marketplaces was nearly $141 million, versus revenue from seller services which was only $56 million.
  • active buyers and active sellers on Etsy increased 19.1% and 19.3% year-over-year, respectively. This is the first time in a few years that sellers increased at a faster rate than buyers, but note that there were still way more buyers added this quarter than sellers. 
  • active sellers for the whole company are up to 2.5 million (remember, that counts anyone who has listed anything in the past 12 months), while active buyers (anyone who bought in the past 12 months) are at 44.8 million. 
  • 59% of sales happened on mobile devices. 
  • "As of the end of the third quarter, 62% of items on the Etsy marketplace offered free shipping to U.S. buyers and 74% of U.S. listing views were eligible to ship for free."
  • they say they are continuing to optimize Etsy Ads, and "have seen negligible budget churn from sellers"
  • the amount spent by each active buyer in the past 12 months grew for the sixth quarter
  • Etsy's gross margin was down a bit, due to the purchase of Reverb, Etsy Payments fees and the introduction of Etsy Ads (I expect they will give more detail during the call)
  • they spent $50 million on marketing this quarter, up from $39 million last year

 

Press release here: https://investors.etsy.com/press-releases/press-release-details/2019/Etsy-Inc-Reports-Third-Quarter-2019-Financial-Results/default.aspx

and here are the slides that go with the presentation: https://s22.q4cdn.com/941741262/files/doc_financials/2019/q3/Etsy-3Q-2019-Earnings-Presentation.pdf (I haven't looked at them yet)

 

The stock is down because Etsy lowered its guidance: https://www.marketwatch.com/story/etsy-stock-down-10-after-company-lowers-guidance-2019-10-30  although I am seeing the usual rise, then drop, then rise happening: https://www.google.com/search?q=Etsy+stock&pws=0&gl=us&gws_rd=cr  As always, it will take a while for everyone to digest the full report and call. 

 

The investor phone call starts at 5 pm ET; I will try to listen in & post highlights afterwards. A transcript of that call will eventually be posted here: https://seekingalpha.com/symbol/ETSY?news=transcripts  and usually elsewhere, within the next 48 hours. 

 

I will mark any key updates as "solutions" so the posts will be highlighted, and will add to this OP in the next hour for as long as I can edit it. 

 

My previous threads on quarterly results, for comparison:

2nd Q 2019

1st Q 2019

4th Q 2018

3rd Q 2018

2nd Q 2018

1st Q 2018

4th Q 2017

3rd Q 2017

cindylouwho2
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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@maplemist  it is sad, & yet probably completely accurate, that you found my satire of how Etsy will launch non-US free shipping tools to be a bit optimistic. 

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cindylouwho2
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This is my updated summary of the conference call, with a bit more detail on topics people have asked about, as well as some quotes. 

 

Search: I was hoping there would be questions on search at the end, but there were not. The main quote on search was (from CEO Josh Silverman) "We've upgraded our context-specific search ranking algorithms from linear to non-linear models, which now leverage a deeper understanding of the relationship between items, attributes and users." They intend to use this change to continue to work on search personalization, which I have seen a few more signs of recently. This change only applies to search at the moment, but they would like to add it to other areas including Promoted Listings in the future. 

Etsy Ads: in addition to what I wrote yesterday, I think this quote covers a lot (Silverman again): "Our data indicates that many sellers are already earning very strong returns for each dollar invested and yet their budgets are too low. We see opportunities for them to invest more with attractive results and our goal is to help them understand this and raise their budgets as a result. The third phase is to add new sellers to Etsy Ads. Our research indicates that a lot of sellers are at a stage of maturity, where they are ready for Etsy Ads but have not yet adopted it, which in turn is limiting their growth. We'll look to communicate the Etsy Ads value proposition for this population and expected option to grow over time. These last 2 phases could take the better part of 2020 and beyond." [There was no mention of the very poor interface & lack of tools, which are going to have to improve if they expect to get a lot more sellers to try Etsy Ads. Also, they really do not grasp that not everyone who sells here wants "growth" out of their business.]
Also, Etsy's income from Promoted Listings grew by 30%, with the move to include Google Shopping contributing $3.7 million to Etsy's seller services income. 

Etsy's own marketing budget: they spent $46.2 million on marketing Etsy in the third quarter; so the rest of the marketing budget mentioned in the press release, nearly $4 million, must be from Reverb. 

Free shipping: An exact quote on sellers not rolling enough of the shipping cost into the item price (Silverman): "Because they seem to be absorbing more of the shipping cost than we think buyers value. Meaning that there wasn't an indication before the buyers thought that things on Etsy were too expensive."

 

If there is any more media coverage of note, I will post it. Thank you again to everyone who commented! 

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SewlyButtons
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I find much of this almost too complicated for this old lady to grasp as comprehensively as I might have some 20-30 years ago (maybe even 40...lol). But after reading through this thread, one quote from the transcript about "incentivizing" us to use free shipping has stuck in my mind... and I find it to be the most troubling of all to me:

Josh Silverman
"We think that is absolutely the right thing to do for the business into the long-term health of the brand and therefore for all of our sellers. And in order to do that, we have a set of carrots and sticks at our disposal to encourage sellers to adopt that. What shows up on the first page of search results is one of those."'

 

Is Silverman seeing the "first page" as a carrot or  stick... or both somehow???? Just the fact that he refers to ANY actions being taken by etsy as potentially being a stick (punishment) is extremely troubling. WE are etsy's customers. The buyers are OUR customers. I can appreciate etsy taking steps and making changes intended to encourage OUR customers to make more purchases, thus making ETSY's customers (US) more profitable, in turn contributing more to etsy's bottom line. But OMG.... a "carrot and stick" approach/mindset is such an incredibly twisted approach to servicing etsy's customers (US). I don't really even know how to put into words how unsettling the whole concept of etsy viewing intimidation (stick) as a good thing for etsy's customers (US).

We ALL pay the same fees to etsy! Is it ethical... or even legal... to so blatantly treat some sellers differently than others ( meaning the whole FS... FS>35... first page priority placement )??? Providing lesser visibility for the same fees (so far). That statement "carrot and stick"... what... WHAT... is coming next???

I wish I had the way with words some of you do... but hopefully y'all understand what's worrying me (and probably lots of others too).

 

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cindylouwho2
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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@SewlyButtons  yes, as I said a few pages back, their approach is incredibly insulting to sellers. We're being treated like children instead of business people. None of us would have made the massive mistake of rolling out the free shipping guarantee without giving sellers the appropriate tools and time to make the necessary changes, and then wondered why more sellers hadn't adjusted their listing prices, but supposedly we are the ones that need to be "educated"? LOL

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SewlyButtons
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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@cindylouwho2 

Exactly... that and much more. You know, I just recently found out about both Poshmark and Mercari. Interesting selling platforms. But what I find really interesting is that Mercari is actually working to HELP their sellers... not dictating to them to ship for free. I'm guessing sellers get their shipping labels thru Mercari. And apparently Mercari negotiated a discount shipping rate for their sellers. From one of their emails:

Be the first to take advantage of our new 4oz shipping label. Cheaper shipping for those small, lightweight items — as low as $2.99. The lowest cost nationwide.
We'll also give shoppers a nudge that new Collectibles are available.

Wouldn't that be refreshing? To see etsy take an action that would HELP sellers work with a Free Shipping model. Instead of just telling sellers to UP their selling prices... but negotiate better shipping rates and PASS THEM ON to the sellers to ease the burden. 

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chapeaunoir
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Mercari: Home of the cheapest of the cheap (I sell there) - just brace yourself.  They DO suggest free shipping, but they're not obsessed with it like Etsy, which is good.  It's also got an awful setup, but I'm using it to blow out the rest of my vintage - Etsy is a waste of time and money, and I was one of those who kept up with changes.  So, I'm just walking away from the cheap n' cheerful and all the cozy beige.

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SewlyButtons
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@chapeaunoir 

I hear you about Mercari... and I suspect Poshmark is not alot different. Neither is a fit for the vintage/antique buttons that I sell. I was more emphasizing that Mercari was doing something FOR the sellers. They're collecting their fees like any other venue. But they're also at least making at least some gesture at making something available to sellers that can reduce sellers costs. I have not seen etsy do anything even remotely similar.... except constant reminders that we're either charging too much for shipping... or we're NOT offering Free Shipping...

 

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SeasideRoseCreations
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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That quote astonishes me.

Carrot and stick approach?

Just amazed here and I'm not easily amazed by this place.

Insulting doesn't even begin to describe that quote.

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KLendoVintage
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Mercari also covers the shipping fees if someone returns something, not the seller or buyer, which is nice. They aren't perfect, but they got simplicity going for them. 

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OneHeartBeadSupply
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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@SewlyButtons 

I'm completely on the same page as you with the same concerns. I'm not feeling at all optimistic, as a seller, going into 2020...

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BottleCapsBeadsnMore
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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Very interesting article here on Etsy and free shipping.

https://www.crainsnewyork.com/markets/etsys-stock-sinks-merchants-balk-free-shipping

Interesting that there are also 2 petitions I found one for shipping and a new one for etsy ads.

There was also another article I was reading stating Etsy is breaking antitrust laws by not allowing competitive business by not allowing sellers on the first page. Just as Amazon is being investigated by the FTC for antitrust for not allowing sellers to have the buy box.

I cant seem to find the article now tho.

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DianeMabrey
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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Thanks so much, Cindy! I appreciate everyone's thoughts, This has been eye opening. While I do well here, I can't help feeling so frustrated with the way they have handled things this year.

The "carrot and stick" comment and how we need to be educated about etsy ads is so insulting.

Like Cindy mentioned not everyone wants to grow their business. I'd love more revenue but just couldn't handle any more orders than I bring in each month. Don't think my hands could handle it. I'm looking at ways to bring in higher revenue without taking on more work. Simply jacking up my ad spend just to have more volume of sales is not something I'm willing to do.

And the whole free shipping thing is out of control. I do FS because it's easy for me and it works but it isn't for everyone. I really think the push is going to blow up in their face if they keep trying to strong arm sellers into it. I don't understand why Josh thinks this is the golden ticket. It's baffling.

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ZehOriginalArt
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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@DianeMabrey  I agree with just about everything you say here. "Carrot and stick" is nauseatingly typical of how this bunch thinks and it's completely insulting. Comments like that do not make me want to comply with their wishes.

Many of us do not want to grow our businesses through more orders as you both say because we do not want the type of growth that involves hiring people to do our work. Can you imagine if I hired other artists to paint for me? I know it's been done and maybe that's what Etsy is looking for, but it's not for me. So perhaps hand makers who make every one of their own products are not suitable for Etsy any longer, yet that is exactly what draws customers to shop on Etsy. So ironic.

Yes, perhaps the FS thing will blow up, I'm not sure about that yet. I do know that the internet sales taxes are a concern in the US. Taxes are still sticker shock to buyers. On the last few orders I've had, sales tax was higher than shipping charges. That is the one reason I am considering doing free shipping, and it will be me absorbing most if not all of the cost. Which means less revenue for me and for Etsy.

 

 

 

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Gokojo
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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@DianeMabrey  I'm really surprised this is something Etsy hasn't seemed to have looked into. I personally have scaled back my business this year on purpose. After averaging 80+ hour weeks in my shop cranking out tables I realized my body and brain couldn't keep doing that long term. I'm happy to sacrifice some money to have a personal life again lol. I'm certainly not the only maker here who uses FS, ads and lead times as a way to control the amount of sales they can handle. 

 

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ZehOriginalArt
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"An exact quote on sellers not rolling enough of the shipping cost into the item price (Silverman): "Because they seem to be absorbing more of the shipping cost than we think buyers value. Meaning that there wasn't an indication before the buyers thought that things on Etsy were too expensive.""

........................................................................

This sounds so convoluted to me I cannot wrap my head around what he is saying by what they think buyers value, how that relates to sellers absorbing the shipping costs and how all of that implies what buyers thought of prices on Etsy.

Can anyone translate, please? @cindylouwho2 ??

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ElisabethMacBeth
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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@ZehOriginalArt 

To me Josh's statement here translates into them knowing full well that buyers never minded paying shipping for the kind of one of a kind goods that could only be found on etsy. At least that is the case in my vintage shop. It may depend on individual shops but apparently the numbers show that to be the case. Even the CEO can't find a way to deny that fact.

It also underscores the fact that this was a (poorly hidden, imo) attempt at raising the gross sales number, at least at first glance. And of course now it is backfiring. 

Q 4 /19 and Q 1/20 will be very telling.

 

And i agree with you. I take personal offense to the term "carrot and stick." What business strategy is "carrot and stick" anyway. Exactly what are they implying? Physical violence against sellers who don't comply? 

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ZehOriginalArt
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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@ElisabethMacBeth 

So many cartoons could be produced. These ideas are just my own imagination and are not meant to be of any particular people. But if I were a cartoonist, I would surely draw them. It always helps to see the lighter side.

  1. An unidentified man whirling an Etsy handmade belt around his head imprinted with FREE SHIPPING while sellers cower before him. Unfortunately his belt removed, now his pants are starting to fall down.
  2. An equally unidentified woman in milkmaid costume churning a big pot of sellers so mightily that they fly out right and left while she chuckles with glee.
  3. Random sellers riding a donkey that has a long stick attached in front of it from which dangles a carrot. Of course, it's impossible to reach the carrot, but they all keep following along anyway. 
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cindylouwho2
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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@ZehOriginalArt   he's saying that Etsy thinks sellers should be putting more of the shipping price into the item price because buyers will pay for it. If buyers had told them items on Etsy were too expensive, then he wouldn't think we should add more to the price. 

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JoeBcrafts
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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He is saying that the $10 belt with $5 shipping wasn't "expensive" in the eyes of a buyer.  The buyer just wanted to see $15 as the buy price with "free shipping" next to it.

So what has actually happened is that the seller has made the belt be $13 leaving $2 off the price.

 

 

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ZehOriginalArt
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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@JoeBcrafts  @cindylouwho2 

OK thank you. Now it makes sense.

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TwentySecondStreet
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Very interesting thread, I have learned a lot, not all of it good!

I also take offence to the "carrot and Stick" approach, also the term "the sellers that matter"are using Etsy Ads, or something like that..

I thought I mattered, at least I matter enough that Etsy is quite happy to accept my fees!

I also am a Canadian seller, so feel at a disadvantage when some of these new changes are rolled out.  My sales have remained consistent so far, but we shall see what the holiday season brings this year.

I really appreciate CindyLou's work in keeping us informed.

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asliceofdelight
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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@DianeMabrey   I believe it's called "ego" add to that  "male ego".  Very little humble pie is eaten when a career like his is being formulated and calculated. The idea that one could actually make a profit on a foundation of service and trust as a cornerstone was lost on him along time ago. It's 10-Q's and 10-K's that he is beholden too.  Sadly not sellers or buyers. 

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MysticMoonShopInc
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The stock is down because Etsy is forcing free shipping on sellers who aren't raising prices to cover the loss (because they feel it is unfair to the customer and they are afraid of not being found in search) and they are being penalized in search which has (as Etsy admitted) created a drop in conversions and pushed typically good selling listings back in search.

These policies are hurting small business owners and Wall Street is not happy about it and they know it's just a matter of time before it all comes crashing down. 

Just wait till the 4th quarter report and everyone see's all the damage this Etsy ads program has caused. 

Being an online seller on Etsy is really tough, between sale tax laws, managed payments, increases in shipping costs, higher fees to sell, free shipping program messing with your search function and listings and the loss of promoted listing (which was working for people) to google ads which are expensive and have a low ROI if you are still here and standing strong you deserve a pat on the back for your determination in the face of EVERYONE trying to grab a piece of what you do ♥ ALL this has happened in a short period of time and the only ones losing in all this are Etsy sellers.

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cindylouwho2
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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@MysticMoonShopInc   since everything goes up during the holiday season, we won't necessarily see much impact in their stats until next year, even if free shipping & Etsy Ads are not as successful as Etsy wants. Many sellers traditionally raise their ads budgets starting around now. It makes things very difficult to separate out, when looking for cause & effect! 

Honestly, I don't think Wall Street cares at all about sellers, & the stock is down because Etsy reduced its guidance on EBITDA a small amount. (Heck, there were even investor articles mocking sellers who complained about free shipping as not having a clue how to do ecommerce!) Reducing the guidance isn't just a problem because of less income; it is a problem because it shows Etsy failed to correctly predict the impact of its moves - which I think most of us can agree upon. 

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GemmaxMontreal
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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Hi @MysticMoonShopInc , I am on Etsy for one year and a half only. But month after month, quarter report after quarter report, Etsy is said to crash soon. Well, this never happened, Etsy sales increases at a fast rate. So, I think a crash wont happen. Etsy will hire some new folks that will find a magic way to balance any weakness their system have. My toughts only.

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