Etsy just released its financial results for 2019's third quarter (July to September) - here are the highlights:
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:
That assumption was likely incorrectly calculated. I do a similar calculation my shop for breakage, theft and other costs. Reading people’s experiences with Etsy’s suggested additions and reviewing those shops sales it was clear to me the calculation was wrong. It is just like the calculation they use to tell people that most people are charging $5 to ship and that your shipping is too high. The calculation is not weighted correctly
If I remember correctly the last report said sellers, on average, rolled 80% of shipping into the price. I haven’t read the new report but sounds like that number might have dropped?
@LandandSeaGems Slide 19 shows sellers are only transferring 60% of the cost. That's a 24% drop from what they estimated. In terms of revenue for Etsy that has to be a large chunk of money they're not getting that they expected to get.
It’s my understanding that those small odd amounts were being recommended for items in your shop under US$35, based on your previous history of multiple items in an order. What they did not consider is the rate of change in buyer behaviour, to purchase an extra lower priced item along with the item they wanted in order to get the free shipping. When that happened, the seller was out for the lion’s share of the shipping cost & Etsy lost their 5% on it.
I never used the FSG tool but I believe it attempted to add the shipping cost only to your shop items US$35 and over. Maybe someone could confirm that.
For items over US$35, it’s possible that some sellers who weren’t doing well with the FSG in Q3 absorbed part of the shipping cost to make their prices more competitive.
slide 19 appears to show that Etsy is concerned that sellers as a whole are eating WAY more of the shipping cost than they originally expected. Meaning not building all of the shipping cost into the item price. I'm assuming they see this as a bad thing in terms of their 5% take on every sale?
I say GOOD, let them lose some of that 5%--they pushed FS & FSG so hard and now they need to accept the consequences. I finally turned on FSG & only barely raised prices on 5 listings out of 117, and then got several nudges from Etsy about adding in some of that into price.
@MaisyGraceDesigns Now, now😉. The real losers are the sellers who are relying on Etsy providing them with accurate information and tested tools. Etsy can afford a down quarter but many sellers may never discover their error and suffer irreparably. Just as we rely on Etsy to collect the proper taxes many sellers are relying on Etsy to help them price their items and shipping correctly.
@Gokojo it reduces their payment processing take & their FVF take because costs are now cheaper for customers overall. They also do think it is bad for sellers, because apparently no one was complaining that Etsy items were too expensive before this (paraphrasing the CEO here).
Yeah, slide 20 is the very long term plan LOL
Sellers don't listen to the suggestion because it does not consider the human aspect. Will someone really pay $X for this item when shipping is included? If you say "no" then the seller will eat some of the shipping cost verses not having a sale. Thus they make less.
Is Etsy taking into account for revenue the sales plus shipping against sales including shipping? This way things are compared apples to apples. I didn't look at the slides.
I don't know how this could have been fairly calculated since every seller is free to decide how much is in shipping cost and how much is in item cost… meaning that shipping cost in listing is not necessarily the genuine one.
Further, as a non-US seller, the free shipping is a headache because the shipment cost to US (or international) is much higher than within homeland. Anyway, yes, the statement means lower revenues / sale for seller, overall or in average, and thus less money to spend in advertising
Thank you for all of your efforts Cindy!
I find the percentages for free shipping or free shipping eligible interesting. Thank you, Cindy Lou :)
that's what I was just going to say. actually I think it's high but I guess they wouldn't fib.
Ok, give me a few minutes to clear my head before I summarize this, as it is easy to get foggy wen you are listening to numbers & jargon for 1+ hrs LOL I hate listening to/watching videos for information, & always prefer to read when available.
(also, my fish need to be fed...)
Stock dropped over $8 in the after hours but rebounded to now down -$5. Forward guidance is the issue
Slide 10: "Making reviews more prominent inspires trust in the buyer journey."
I wish that journey included reading the description of what the item is.
LOL at slide 18 and the downside of free shipping being search relevance. So they did notice that.
Exactly! Making reviews more prominent shouldn't require hiding the actual listing details!
I absolutely wish Etsy would add "not reading the description" as grounds for getting an ad removed. Those are the only negative reviews I get.
If they want to inspire trust, perhaps they should reconsider lying about shipping being free.
|we made a foundational upgrade to our ranking algorithms
And there is the answer I've been looking for. I knew they changed something recently. They need to revert this change asap. A LOT of shops are hurting because of it, which will in turn, hurt Etsy.
They migrated over to Google Cloud last year or maybe even in 2017? I can't remember exactly but it's been awhile. They usually tout the same thing in every quarterly review. AI leaning more, algorithm getting better, etc etc.
The issue sellers are working through now is likely due to the recent FSG and Etsy Ads that the AI now has to deal with and learn.
@RevivalWoodworking search is always changing here, and they won't roll those changes back unless their overall sales drop from them. Since the conversion rate went up from this change, they won't be reversing it. Etsy is not hurting.
But as @Gokojo says, the search change is probably a smaller issue for most shops, compared to free shipping & Etsy Ads. All of these things happened within 1 month of each other, and any one change would take several months for the algorithm to sort out, never mind 3 separate changes. As always, we have to adapt, not wait for Etsy to reverse changes.
This is a Q3 report so churn should be low as migration to the new Ads was going on the whole month and completed at the end of Q3. This is kinda a meaningless statement since the site wasn't even a month on the new platform.
Most people did not even know about the change as they just set the cpc and left it. And a lot of people let ads run for a bit into Q4 before shutting them off.
Another telling statement is that they want to push sellers into upping their budgets...is this because they are seeing a reduction in ad spend budgets? Last report they showed all this money on the table unused....is that gone now so they need sellers to raise their budgets again?
Josh also made a statement that seemed to imply they are now throttling back ad spend as the jury is still out from sellers...What this points to is that you will not see your whole daily budget being spent in hopes sellers raise back their budgets...at such time they will then increase how much of that budget is spend only after the go into phase 2. (Get sellers to increase their budgets)
With the holidays coming it will be hard to tell how these ads are doing and a better review on how they are accepted sitewide would be in Q1 and Q2 reports in 2020.