Search is one of the most precious assets ecommerce marketplaces have - it's how shoppers find the kind of items they wish to buy - but Etsy is using it as leverage to push sellers into offering free shipping.
Etsy executives admitted on Wednesday that its new free shipping initiative resulted in pushing a large number of relevant listings off the first page of US search results, hurting conversion rates.
However, they are not backing down, according to Etsy CEO Josh Silverman and Chief Financial Officer Rachel Glaser during an October 30th conference call with Wall Street analysts to discuss 3rd quarter earnings.
Glaser called the impact of the policy a headwind for the company and said it had a negative impact on conversion rate, adding that Etsy would be experimenting with its search algorithm, which she compared to a "cocktail of ingredients."
We pulled the following excerpts from Glaser's presentation and her responses to analyst questions about the impact of the policy:
A second headwind to the free shipping initiative relates to search ranking. We have used search ranking as a key incentive for sellers to adopt the free shipping guarantee. As expected, this has had the effect of pushing a large number of relevant listings off the first page of US search results.
With slightly over 60% of items listed as free-shipping eligible, this means 40% of items are not given first-page placement even if our search algorithms might have previously ranked them higher. This has a negative impact on conversion rate.
One of the levers we have to incentivize sellers to adopt free shipping, we've pushed some of the really good search results off to a second page or further, and that causes a decrease in conversion.
Our search algorithms are a 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's a lot of things that we can do to that search algorithm composite. So over time we could play around with that. I call it (the search algorithm) a cocktail of ingredients that go into that search result, and we will. We test everything at Etsy, and going forward, we will be experimenting with that as well.
She explained that Etsy only started marketing free shipping to buyers in September, and "the more buyers understand that Etsy is a place you can get free shipping like you can on most ecommerce sites, the more that becomes an incentive for sellers."
Etsy executives also revealed that so far, "sellers absorbing more of shipping costs than pre-launch testing indicated...or is warranted."
We suspect Etsy's revelations about the impact of its free shipping policy won't surprise many sellers.