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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@BottleCapsBeadsnMore   Some people converted to Etsy Ads the days they started, so it was over 1 month for the report, & they have an additional month of data to analyze since. 

They said that some sellers are doing well with the new Ads but not as well as they could be because their budgets are too low. 

Etsy is throttling back its own outside ad spend, was how I understood that whole statement, not seller spend. Yes, they want us to buy ads, and they will reduce our exposure to force us into it. 

 

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cindylouwho2
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Okay, here is my summary of the conference call, with the usual qualifying statement that exact quotes & some of the numbers won't come until I read the transcripts, as it is easy to get those wrong when taking notes. The first transcript will likely come out late tonight, & Etsy may release public statements for sellers tomorrow. 

I've organized the comments by topic & not by the order of the call, as many things get covered in more detail after the questions. My editorial comments are in square brackets. For ease of reading, here are the slides again [pdf]: https://s22.q4cdn.com/941741262/files/doc_financials/2019/q3/Etsy-3Q-2019-Earnings-Presentation.pdf

 

overall site sales & Etsy's revenue: all strong, despite some impact from things such as larger states adopting internet sales taxes on out of state purchases. 

 

Free shipping: has gone well for Etsy. Slide 11 shows the progression of items that ship free to the US, now at over 60%. 74% of views on items that that ship to the US are on free shipping items. Buyer surveys say buyers are happy, & habitual buyer conversion rate is up. Sellers who offer free shipping have more sales than those who do not.
However, Etsy is surprised that sellers have moved only about 60% of the shipping cost to the item cost (slide 19). In particular, sellers with most listings under $35, sellers with expensive items, and non-US sellers do this the most. They will be working on educating us more on this point, and introduced the tool for items under $35 this month to help us with that. They wont be releasing tools for non-US sellers until 2020. [rant warning - #!%*#$! why didn't you give us some tools before you rolled this out? Non-US sellers didn't get the over $35 tool until August! Releasing a new tool for adjusting low-priced items during the holiday rush isn't going to help many of us, especially since they explained it so poorly that most sellers took it as an insult. Furthermore, you can't do proper adjustments on listings with price variations since shipping profiles do not attach to price variations. And since non-US sellers generally have higher shipping costs but didn't get any timely tools, what the heck did you expect us to do? Miss an entire holiday season, or absorb some costs while we painstakingly edit each listing? The answer is pretty obvious here. End rant.]
Interestingly, they admit that the move to make page 1 of US results all free shipping items led to lower conversion rates because many relevant items were pushed to page 2, but they accept that because free shipping is more important to their long-term business model than some extra sales. Search was one of the few "incentives" they had to get sellers to comply. 

 

Etsy Ads: have gone as expected, with very few sellers dropping out, or even dropping their budgets. There was "no material churn in aggregate budgets." They describe sellers as waiting to see how this will work. They are working with Google on improving the returns on the Google Shopping portion, and increasing the ROAS (return on ad spend) for the PL portion as well. [They are still calling the ads on Etsy PLs, at least in this call.]
Some sellers are not doing as well as they could be because they have set their budgets too low, so they will work on pushing us to increase the budgets to make more sales. [hard to say if they actually missed that some sellers can't handle more sales; I think they forget that some people are still doing everything by hand, without employees.] Their next push will be getting more sellers to use ads; they have identified a group of small to medium sized sellers who they feel will benefit. This will be a slow push over 2020 and beyond. 
They did decrease the amount they are spending on product ads as a way of pushing us to opt in to Etsy Ads, so lost some sales due to that.  They are planning on using some of that saved money for more higher level brand advertising. [odd, because my views from Google Shopping ads are increasing, since EA rolled out.] The new stats are due to the new Ads, as they think they show us more info on ad success. [So, Etsy Ads will not be going away. Etsy is happy with the current rate of use and will be pushing them more over time.]

 

Tests/experiments: they've gone from doing 100 a month in 2016 to around 500 a month, & they are very proud of it. 

Reviews: items with more reviews sell more often, so they changed the layout to show more reviews, & to show more useful reviews, such as those with text and/or photos. They are now working on encouraging buyers to write more reviews. 

Making It: the new season of the TV show debuts December 2nd. 

Reverb: is responsible for some losses & some gains. It increased total revenue and buyer/seller totals, but cost more because they moved the company to Etsy's benefit model, and because they are more affected by the state sales tax issue, having higher priced items & more US-based buyers. 

Habitual buyers (people who make at least 6 purchases and spend more than $200 a year here) are the fastest growing group of buyers. 

search: they changed context specific search ranking (CSR) from linear to non linear in August. (slide 7) They did not go into more details on how this is working specifically on Etsy, but indicated that this development was continuing, and they expect to add this change to other areas of the site, such as PLs, in the future. Conversion rates improved with this change. [I will be doing more research/asking more questions in the coming days.]

 

Expect a final update from me tomorrow, & media coverage over the next 48 hours. 

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

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500 tests a month?  No wonder there is so much broken stuff.

Non US sellers have kind of been left by the side of the road as the Etsy bus pulls away from the station.  

Are there really that many sellers who are happy with no control over cpc?

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

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Interestingly, they admit that the move to make page 1 of US results all free shipping items led to lower conversion rates because many relevant items were pushed to page 2, but they accept that because free shipping is more important to their long-term business model than some extra sales. Search was one of the few "incentives" they had to get sellers to comply. 

----

I think they admitted that when they sent out the TENTH threatening email in a month telling us to convert to free shipping or else.... then another.... no really OR ELSE!  I don't know why they think it's worth it. Bay already ran this experiment, analyzed the data and decided it wasn't.  

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

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Thank you Cindy for an excellent summary.

 

 

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PUREWHITEDECO
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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   Thank you Cindy

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

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"Etsy Ads: have gone as expected, with very few sellers dropping out, or even dropping their budgets. There was "no material churn in aggregate budgets." They describe sellers as waiting to see how this will work. They are working with Google on improving the returns on the Google Shopping portion, and increasing the ROAS (return on ad spend) for the PL portion as well. [They are still calling the ads on Etsy PLs, at least in this call.]"

 

What is PL? Thanks!

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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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@CatWomanVintage  promoted listings, as they used to be called. Ads within Etsy. 

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

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Got it. Thank you for clarifying. :)

Thank you also for this valuable information.

I swear I'm spending more time these days trying to figure out if I should keep going with Etsy or move on. Right when things were beginning to pick up again. Grr.

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

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However, Etsy is surprised that sellers have moved only about 60% of the shipping cost to the item cost (slide 19). In particular, sellers with most listings under $35, sellers with expensive items, and non-US sellers do this the most. They will be working on educating us more on this point...

 

Yes. This is by design. Most sellers outside the US disagree in principle with overcharging local buyers on small items to subsidise purchases by cashed up US buyers on expensive ones. Personally, I will not buy from a local Etsy shop that has jacked up their prices on Etsy to provide free shipping to the US for this reason. Why are wealthy Americans worthy of an effective donation from me? Cost of living pressures are certainly no easier here in Australia. Etsy aren't going to have any success flogging that one... most shops I know here will just stop shipping to the US altogether rather than choosing to overcharge their local buyers.

Their next push will be getting more sellers to use ads; they have identified a group of small to medium sized sellers who they feel will benefit. This will be a slow push over 2020 and beyond. 

Crosses fingers that I am no amongst the poor group of sellers they will be targeting here!! At least they say it'll be a slow push, and I drive much of my own traffic. 

 


 

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PaulaArt
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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   thanks for this report!  can you or anyone else suggest how OOAK sellers can work around this statement: 'Reviews: items with more reviews sell more often, so they changed the layout to show more reviews, & to show more useful reviews, such as those with text and/or photos. They are now working on encouraging buyers to write more reviews.'

I take that to mean if you have several of something it becomes a best seller and people can leave more reviews on it etc.  Where does that leave us artists or vintage sellers who may have just one of each?

thank you!

 

 

 

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

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Well, duh "items with more reviews sell more often,". Of course, things that sell over and over have more reviews. And of course OOAK items have fewer reviews - like maybe one. Why they'd use that false if/then conclusion to hide the item details is baffling to me.

 

edit: Jinx,  Paula. We are thinking alike this morning.

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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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@FuzzyFoxDesigns   it's true they either don't seem to fully grasp the resentment of non-US sellers that we are supposed to shaft our domestic customers to favour Americans ones, or they just don't care.  Most of us can't afford to stop shipping to the US, though, as they still have the majority of Etsy buyers. 

I've chosen to use the free shipping sale to give my domestic customers free shipping on orders of $25 & up, so they are getting a better deal, but I agree it still isn't enough, plus sales don't show in search unless the free shipping filter is used, and they don't get the free shipping boost we have in Canadian searches. Therefore, I also manually changed shipping profiles on items from $25 & up to provide free domestic shipping, which took me close to a week to accomplish because obviously you need to check the stats on each listing to see what needs to be adjusted to make this work. Not all of my item prices could be raised and still sell. 

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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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@PaulaArt   shops that don't sell multiples still benefit from their overall feedback rating, & other reviews still show on their listings.

This is just one thing Etsy has tracked that makes a difference in conversions; no doubt there are hundreds of different situations that Etsy has tracked & noted to make a difference in conversion rates.  No one is going to have every advantage going for them. 

@EightMileVintage   I have many items that I have sold multiples of that do not have a single review, for whatever reason. It does tend to happen with items bought as gifts near the holidays, especially if the buyer finds me outside of Etsy. So selling over & over does not automatically lead to reviews.

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FuzzyFoxDesigns
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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 

They really do have no idea how Aussie sellers feel about the free shipping push... if they did, they'd give up. I come against this all the time with the group I help to run.

In my group, only a handful of the biggest sellers are able to ship free to the US - typically those who drop ship from within the US already, or who can send things as uninsured letters from Australia for a small amount. For most other sellers, losing the local market by increasing prices to cover US shipping would be unsustainable. Many have tried it and it failed dismally for them.

There just aren't adequate words for how it makes us feel in Australia to overcharge everyone else (who will be mostly local buyers) in order to ship bigger orders to the US for free. Extreme resentment doesn't capture it.

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Gokojo
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"Interestingly, they admit that the move to make page 1 of US results all free shipping items led to lower conversion rates because many relevant items were pushed to page 2, but they accept that because free shipping is more important to their long-term business model than some extra sales. Search was one of the few "incentives" they had to get sellers to comply. "

Ohhh I could drop some serious F bombs right now. In a nutshell "eh, we're cool showing worthless listings and hiding stuff buyers may actually want because free shipping is just that important. And we will hold that gun to the sellers heads until they fully comply."

Jesus, they willfully admit they did a sh*t job explaining free shipping to us, are shocked that sellers are eating the cost, are late rolling out tools to explain it better yet STILL are going to cram it down our throats? Here's a thought, if something is important to your long term growth, MAYBE, just MAYBE take a wee bit more time getting your ducks in a row before forcing it upon us.

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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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@Gokojo   As I have been saying, there is something else coming that they wanted all of these changes in place for. That's why they introduced the free shipping guarantee and Etsy Ads in such an incomplete state. 

It is nice, though, that they are freely admitting to coercing us. This will make a lovely blog post!  😉

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Gokojo
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@cindylouwho2  I know you've been mentioning that and am interested to what you think this missing piece is. I know we've wondered if it's launching Premium but do you think it could be something else?

To me, from a purely business mindset it doesn't make sense to haphazardly rush out phase one and two just to get to whatever phase three is. At the moment, both FSG and EA are looking more like strike one and two. I've delayed listing new products simply because I haven't totally figured out the exact way I want/need to make them to ensure that my customers will receive them and be totally satisfied. It does me no good to sell something that's half baked as it's just going to upset people who receive the "finished product".

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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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@Gokojo  adding more things to Plus & releasing Premium are two possibilities, for sure. I was also told they were going to be giving us new search instructions by the end of summer, but nothing has come out except the not-really-new article on attributes. We were also told they were going to be doing more non-US advertising this fall to make up for everything we non-US sellers have lost, but they did not mention that at all today, even when mentioning the commercials only run in the US at this time.  I have other fears but I am not going to start rumours LOL 

It's scary how many companies think that using paying customers as guinea pigs to work out bugs & develop products is completely fine. Yet, here we all are, paying 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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@cindylouwho2  well I'm glad they didn't give us new search instructions this summer because wow would they be pointless now lol! I really hope the end game isn't the launch of Premium, I'll avoid these forums like the plague. Though the branding behind it would be hilarious. "Hey, you remember those stats, data, and control you use to have but we took away? You can now have that back for a mere $25/mo with the new Etsy Premium!"

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DaysofYoreTreasures
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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  @Gokojo 

A couple of interesting quotes from the transcript about "incentivizing" us to use free shipping.

Rachel Glaser
"Our search algorithms our composite of many factors that go into them. Right now free shipping is weighted more heavily and it pushes the listings that are not free shipping or free shipping eligible to a lower page. But we have going forward, a lot of other ways to incentivize sellers to adopt. There is a lot of things that we can do to that free shipping to the search algorithm composite."

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."

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cindylouwho2
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@DaysofYoreTreasures   oh yes, there are tons of interesting quotes in there. We're just brainless donkeys to them, who know nothing about our own businesses & need to be dragged along to do the right thing for Etsy. It's all so insulting. 

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Gokojo
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@DaysofYoreTreasures  For those of us that actually follow and pay attention to all of this, it's maddening and so, so incredibly insulting. But those of us who are awake at 12:21 am reading the transcript are wayyyyyyyy in the minority when it comes to the millions of sellers on this platform. 

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DaysofYoreTreasures
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@Gokojo 

I have to admit to a big advantage. It's not even 4:30 in the afternoon here down under. I haven't even had a glass of wine yet, lol.

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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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@DaysofYoreTreasures  I'm not sure whether I should be envious or brag that I've been home in my jammies, sipping tequila reading this over!

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