Dive Brief:
- In a letter to shareholders Wednesday, Etsy CEO Kruti Patel Goyal touted the company’s Q1 performance as good news for its turnaround. Total Q1 revenue reached $631 million, with Etsy marketplace up more than 6% to nearly $433 million and Etsy services up more than 10% to nearly $200 million.
- Since last year, Q1 net income expanded by $33 million to $105 million, as gross merchandise sales rose more than 5% year on year to $2.5 billion, per the letter.
- Higher spend per buyer drove the GMS growth, as the number of active buyers fell more than 2% to 86.6 million. The report left out the Reverb and Depop businesses, which have been sold.
Dive Insight:
Patel Goyal, a 15-year Etsy veteran who is new to the chief executive post, said that Q1’s results show that the company’s efforts to improve discovery, engagement and buying frequency, unveiled in the last year, are beginning to pay off.
“We saw encouraging signals during the first quarter that our growth priorities are taking hold,” she said in her letter, which she also read to analysts Wednesday morning. “We are executing with discipline and measuring progress through observable changes in customer behavior. So, following the completion of my first quarter as Etsy’s CEO, I have even more conviction in our focus, and confidence in our ability to execute and translate recent momentum into durable growth.”
The marketplace is leaning on AI for some of these efforts, building agents for both buyers — for now, assistance with finding gifts — and sellers. The company also recently developed an app within ChatGPT.
“We see just so much exciting opportunity for us to leverage this technology to build a much better, much more personalized experience on Etsy,” Patel Goyal said, adding that AI will help the company understand three fundamentals: its inventory; its customers’ tastes and interests; and buying intent at a given moment.
But this is a careful expenditure, subject to “a very rigorous ROI discipline,” according to Etsy Chief Financial Officer Lanny Baker.
“The investments we're making in AI and the features that we roll, and the costs associated with the compute behind that, is all going to be framed with reference to its impact on GMS growth and long-term user growth and frequency growth,” Baker told analysts. “And we'll manage that with a mind toward long-term profitability.”
Moreover, a major differentiator at Etsy depends on human decisions, interactions and connection, Patel Goyal said. She called on sellers to refresh their offers and focus on customer service, as Etsy works to improve the seller experience. Since divesting its musical-instrument marketplace Reverb last year and agreeing earlier this year to sell U.K. resale site Depop to eBay for $1.2 billion, Etsy is returning to its roots as a marketplace populated by sellers with handcrafted, vintage or otherwise unique merchandise.
“Really, the most important things that our sellers can do to add value to the marketplace is continue to innovate at really new inventory to the marketplace and continue to provide really great human service to our buyers,” she said. “These are the places that we're really focused on investing in.”
Clarification: This article has been updated to reflect Etsy CEO Kruti Patel Goyal’s full last name.
