Why Is Etsy Outperforming Its Online Marketplace Peers?

Impressive by Comparison

Earlier this week, ecommerce firm Etsy (ETSY) reported a 3.3% decline in gross merchandise sales during its third quarter, year-over-year. While the company would’ve preferred growth, the number came in better than analysts predicted. It was also a less dramatic decline than eBay’s (EBAY) 11% drop in Q3.

Etsy also reported EBITDA of 28%, which exceeded expectations. And, in addition to doubling its active buyer base over the past three years to a total of 94 million, 6 million new buyers joined in the most recent quarter.

It would seem Etsy’s business model of selling handmade goods, decor, and crafts is holding steady — even while inflation eats into discretionary spending.

Users Give Etsy an Edge

During Wednesday’s earnings call, Etsy CFO Rachel Glaser discussed Etsy’s competitive advantages. She noted that sellers have not raised their prices significantly despite inflation and other pressures. It would appear the platform’s skilled creators are not aggressively maximizing profits, which could also be helping to drive sales.

Another factor that seems paramount to Etsy’s success is the site’s diverse product offerings. For example, homemade masks were the top seller during the pandemic’s peak, but now products associated with time spent away from home are on the rise. Q3 sales of back-to-school items were up 25% year-over-year, while purchases of Halloween decor and costumes rose 17%.

How About the Holidays?

For every retailer and ecommerce company, the holiday season is vitally important. Amid rampant inflation, consumers will likely opt for Etsy’s bespoke brand of affordable and personalized stocking stuffers over big ticket gifts. Plus, retailers are struggling to manage inventory levels given the recent supply chain issues, which isn’t a problem for a third-party seller like Etsy.

Industry observers give Etsy high remarks for investments it has made into upgrading the company’s app and website. The company has also avoided being too aggressive with new hires, helping it hold on to talented workers and avoid the layoffs some other tech companies are experiencing.

As with its artisanal sellers, Etsy seems to have discovered that slow and steady does, indeed, win the race.

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