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Etsy Marketplace Sales Grow 127% in 4th Quarter 2020

Etsy
Etsy Marketplace Sales Grow 127% in 4th Quarter

Etsy grew the volume of sales (GMS) on its marketplaces Etsy and Reverb by 118% in the last quarter of 2020, year-over-year, it announced on Thursday, February 25, 2021, and it grew revenue by 129%.

Etsy standalone GMS, or Gross Merchandise Sales (without Reverb), grew 127% in the 4th quarter, Etsy Chief Financial Officer Rachel Glaser told analysts.

In a post-earnings call with Wall Street analysts, Etsy revealed the following, which we thought worth pointing out to sellers:

  • Etsy said it was the 4th largest ecommerce site by monthly visits in the US, citing data by disfold.com.
  • Etsy found a way to get an extra 12% commission on 9% of its revenue in the second half of 2020 through Offsite Ads fees.

Excerpts of Etsy’s Q4-2020 earnings press release follow:

Etsy, Inc. Reports Fourth Quarter and Full Year 2020 Financial Results

Etsy, Inc. (NASDAQ: ETSY), which operates two-sided online marketplaces that connect millions of passionate and creative buyers and sellers around the world, today announced financial results for its fourth quarter and full year ended December 31, 2020.

“Exceptional fourth quarter performance, with consolidated GMS and revenue growth of approximately 118% and 129% respectively, capped off a transformative year for Etsy,” said Josh Silverman, Etsy, Inc. Chief Executive Officer. “2020 was an inflection point in history for e-commerce and for Etsy, with millions of buyers choosing us for their everyday needs as we lived up to our mission to ‘Keep Commerce Human.’ We are particularly gratified that circumstance met preparedness, highlighting the agility of our team and the power of our differentiated strategy.”

“In conjunction with achieving record 2020 consolidated financial results of approximately $10.3 billion in GMS and $1.7 billion in revenue, we provided economic opportunity for millions of creative entrepreneurs, cared for our team and communities, invested deeply in technology, improved customer experiences, expanded Etsy’s global visibility through world-class marketing strategies, and gained meaningful market share. We are just getting started executing on our long-term growth strategy, focused on highly differentiated and defensible competitive advantages within a $1.7 trillion market opportunity.”

“Etsy delivered industry-leading GMS and revenue growth together with strong profitability in the fourth quarter,” said Rachel Glaser, Etsy’s Chief Financial Officer. “Product enhancements and disciplined marketing investments worked together to increase buyer lifetime value, enabling us to increase spend in marketing while maintaining high return on investment. We are making meaningful improvements in buyer engagement, retention, and frequency, all important levers to maximize our growth opportunity. For example, we saw a significant improvement in the value of Etsy buyer cohorts in 2020, as we acquired 61 million new and reactivated buyers, and saw nearly 160% growth in our habitual buyers.”

Fourth Quarter 2020 Highlights
Factors contributing to Etsy’s very strong fourth quarter performance included acceleration in non-mask product categories, better than expected macro conditions, successful product and marketing initiatives and an extended holiday buying season including a record-setting ‘Cyber Five’ on Etsy.com. Many of these factors drove traffic of new and repeat buyers, positively impacting conversion rate and GMS.

Marketing: we expanded investments across all marketing channels to bring new buyers and help drive frequency among existing buyers:

  • In television and digital video, our U.S strategy included both direct response ads and those designed to create an emotional connection with consumers. We ran holiday campaigns in the United Kingdom and Germany, and rolled out our first-ever Spanish language ads. These campaigns delivered strong return on investment and positively impacted Etsy brand metrics.
  • Brand marketing spend, including television and digital video, was 23% of our overall marketing spend in the fourth quarter, or approximately $49 million.
  • We launched new on-site landing page experiences to help buyers more easily navigate holiday listings, extended the duration of our Cyber campaign, and expanded our successful influencer partnerships.

Product: focused on our Right to Win strategy, we improved customer experiences across the Etsy marketplace including:

  • Making additional progress closing the semantic gap to improve search, driving higher conversion and repeat purchase rates, as we translate search queries to what buyers actually want, show more listings, and reduce null result searches.
  • Expanding personalized search to other devices, such as our app, improving recommendations by showing same-shop recommendations based on previous listing views, and adding pathways to the ‘similar items’ page.
  • Deepening human connections through engagement and adoption of listing videos, which expanded to approximately 3.2 million by December 31, 2020. We’re featuring videos in many of our marketing channels, including site-wide Cyber Week sales.
  • Building trust by focusing on the core buying experience, improving shipping transparency and post-purchase experiences. For example, we added an expected delivery date filter to show items available by a certain date.
  • Launching ‘buy now, pay later’ installment options for U.S. buyers, making higher priced items more accessible, and expanding Etsy Payments to two new countries.
  • Enhancing our Etsy Ads service, improving the functionality and user experience for sellers, contributing to 74% year-over-year consolidated on-site advertising revenue growth in the fourth quarter.
  • Offsite Ads, our advertising program which promotes Etsy sellers’ listings on multiple platforms, continued to yield encouraging returns, with opt-out rates less than 2% during the quarter. We began charging sellers this ‘success based’ transaction fee on May 4, 2020; with 9% of Etsy GMS subject to these fees in the second half of 2020.

Impact pillars:

  • We made significant progress on goals aligned with our Economic, Social, and Ecological Impact pillars, as well as supporting our communities in 2020. We recommend investors read our soon to be released Integrated Annual Report for further details of these activities.

Reverb:

  • Reverb also reported strong quarterly GMS growth, benefiting from many of the same macro factors as Etsy. The marketplace experienced a high influx of new buyers driving GMS growth, and new sellers, both professional shops and individuals, offering ample new and differentiated used and vintage musical gear.
  • Reverb improved comparison shopping pages, enhanced the way it promoted financing options, and made investments in search, structured data, personalization, and performance marketing.

GMS highlights:

  • GMS excluding mask sales for the Etsy marketplace was $3.3 billion, up 118% year-over-year, and 4% of the Etsy marketplace’s overall GMS was from mask sales.
  • GMS generated on the five key shopping days from Thanksgiving through Cyber Monday for the Etsy marketplace was up 135% compared to the same period last year.
  • We made continued progress driving frequency, as Etsy marketplace’s GMS per active buyer on a trailing 12-month basis grew 13% year-over-year and 6% excluding masks.
  • In the fourth quarter, the Etsy marketplace acquired approximately 13 million new buyers and 7 million reactivated buyers, buyers who haven’t purchased in a year or more. Habitual buyers, buyers with 6 or more purchase days and over $200 in spend in the trailing 12-months, grew 157%, outpacing overall active buyer growth, and repeat buyers, buyers with 2 or more purchase days in the trailing 12-months, grew 97% in the fourth quarter.
  • Consolidated active buyers grew 76.7% year-over-year in the fourth quarter, and active sellers grew 61.7% year-over-year.
  • International GMS for the Etsy marketplace was 41% of overall GMS, and increased 145% year-over-year on a currency-neutral basis, driven by our marketing efforts and our international domestic trade route, which is GMS generated between a non-U.S. buyer and a non-U.S. seller both in the same country. International domestic trade route reported the strongest growth, with the United Kingdom being the strongest growing market within our seven core markets. Importantly, according to Comscore, in the fourth quarter Etsy became a top five e-commerce website in the U.K.
  • GMS from paid channels was 21% of overall GMS in the fourth quarter of 2020, expanding 400 basis points compared to the fourth quarter of 2019.

Fourth Quarter 2020 Financial Results
The following financial highlights reflect our consolidated financial results for the fourth quarter of 2020:

  • Total revenue was $617.4 million, up 128.7% year-over-year, driven by growth in both Marketplace and Services revenue.
  • Consolidated take rate (i.e., revenue divided by GMS) was 17.1%, up 80 basis points year-over-year, driven by Etsy Ads, Offsite Ads, and the expansion of Etsy Payments platform.
  • Gross profit was $466.6 million, up 160.4% year-over-year, and gross margin was 75.6%, up 920 basis points compared with 66.4% in the fourth quarter of 2019. The increase in gross margin was primarily driven by our shift to Offsite Ads, which drives revenue growth without an equal offset in cost of revenue.
  • Total operating expenses were $305.2 million, up 98.0% year-over-year. The increase in operating expenses was driven primarily by growth of our investments in marketing and, to a lesser extent, product development.
  • Net income for the fourth quarter of 2020 was $148.5 million, up 374.7% year-over-year, with diluted earnings per share of $1.08.
  • Non-GAAP Adjusted EBITDA was $192.0 million. Non-GAAP Adjusted EBITDA margin (i.e., non-GAAP Adjusted EBITDA divided by revenue) was 31.1%, up 1,090 basis points year-over-year. Adjusted EBITDA performance was driven primarily by revenue growth and increased efficiencies in our operating structure.
  • Cash and cash equivalents, short- and long-term investments were $1.7 billion as of December 31, 2020. Under Etsy’s stock repurchase program, during the quarter Etsy repurchased an aggregate of approximately $77.5 million, or 618,841 shares, of its common stock. Etsy’s Board of Directors has approved an additional stock repurchase program that will enable the Company to repurchase up to $250 million of its common stock.

You can find the full press release including charts and guidance on the Etsy Investor Relations website.

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Ina Steiner
Ina Steiner
Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com. See disclosure at EcommerceBytes.com/disclosure/.