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  • Etsy, the global e-commerce platform known for unique and

  • handmade goods, reported its highest ever annual revenue of

  • $2.7 billion in 2023.

  • But that's not the full picture.

  • Its gross merchandise sales, or the total value of goods

  • sold on Etsy, declined in the same period, falling flat for

  • the second year in a row.

  • It stocks its more than 70% lower than its 2021 high, and

  • first quarter 2024 earnings results didn't look much

  • better.

  • Etsy's consolidated results, while within our guidance

  • range, were not where we wanted them to be.

  • After the big increase in both buyers and spending per buyer

  • during Covid, it looks like they've hit a wall and you

  • basically have a company that has not grown in two years.

  • Some longtime sellers are partly blaming CEO Josh

  • Silverman, saying his focus on profits has pushed the

  • company away from its vision, allowing counterfeits and mass

  • produced items to thrive, demoralizing artists and

  • buyers.

  • Competing with people who are generating art via artificial

  • intelligence. Now I can't compete.

  • It's just junk. A lot of it.

  • You're just going to be a slightly more expensive

  • Amazon. That seems like a terrible business plan.

  • With discretionary spending down a first quarter 2024 miss

  • in both merchandise sales and profits, and an acknowledgment

  • of poor execution by its CEO, Etsy's future is uncertain.

  • It's a public company.

  • Its job is to return value to shareholders.

  • At the end of the day, they need to be able to sell things

  • that people want.

  • When Etsy first came on the market in 2005, it was a

  • revolutionary idea.

  • People who loved arts and crafts finally had a place to

  • buy those things all the time and get connected with sellers

  • and artisans and artists who maybe they would have never

  • encountered before.

  • Etsy's founder and then CEO, Rob Kalin built the platform

  • to empower artisans.

  • His vision was that Etsy could influence society in a

  • way that people would think more consciously about the

  • products they chose.

  • How do you get from just doing it as more of a hobby, to

  • organizing this to the point where you can actually make a

  • living?

  • The virtual storefront also enabled a new kind of

  • revolution.

  • These small businesses, these local artists, suddenly had

  • the ability to connect with buyers all over the world.

  • And this was huge.

  • I mean, it was an opportunity for them to grow their brand,

  • grow their sales.

  • Nicole Aline Legault and Chiarra Lohr are just two of

  • the many artists who joined Etsy to sell more of their

  • work. Legault has been there since 2009.

  • Everyone that I knew was opening up a little shop

  • because it was one of the only places that was offering

  • this platform and template.

  • It was very about the sellers.

  • They were really driving the traffic and making the site

  • what it was and creating a community.

  • Transaction fees were initially low.

  • Etsy received B Corporation status in 2012, and was one of

  • the first companies with that certification to complete an

  • IPO, which it did in 2015.

  • At the time, it was valued at $1.8 billion, but the cracks

  • in Etsy's foundation were already forming.

  • Kalin stepped down as CEO in 2011 for a second time.

  • As competition was stiffening, the next CEO made

  • a big change in 2013, allowing artists to use

  • outside manufacturers to produce their designs.

  • The term handmade was getting looser.

  • And in this new public arena, the company was beholden to

  • financially focused shareholders with a laser

  • focus on growth.

  • Etsy's stock lost more than 70% of its value its first

  • full year as a public company.

  • From the beginning, Etsy wasn't profitable.

  • You know, when it went public, it was deeply in the

  • red. This wasn't uncommon for e-commerce companies.

  • It's still not necessarily uncommon for disruptive new

  • startups and things like that. But over time, you

  • needed to kind of change that.

  • Vendors, too, were unhappy for different reasons.

  • There's been a massive culture clash at Etsy.

  • It's something that really started after the company went

  • public. It's happening internally with employees who

  • had been there since the beginning, had kind of seen

  • this company as, you know, different.

  • Yet another CEO was appointed in 2017.

  • Josh Silverman made both short and long term changes,

  • laying off 22% of Etsy's workforce that year and later

  • pushing through transaction fee hikes and shipping fees.

  • He also introduced a new tier -based subscription model for

  • sellers to jumpstart their growth--at a cost.

  • It's ultimately like maybe too focused on keeping the sellers

  • happy and wasn't doing enough to kind of drive buyer

  • satisfaction. So that's what Josh tended to focus on, you

  • know, kind of maybe more balancing both sides of a

  • marketplace, which is key.

  • By 2018, things were picking up, sales were growing, and

  • the stock was at its highest.

  • The turnaround was attributed to Silverman's leadership.

  • And then the pandemic.

  • For the month of April, Etsy sold $133 million worth of

  • face masks. That's 12 million face masks.

  • The pandemic was a boon for Etsy.

  • The number of active buyers increased by about 77%.

  • Gross merchandise sales grew by more than 100% year over

  • year in 2020, and more than 30% in 2021.

  • Etsy stock price reached its all-time high that same year.

  • It also started charging some of its sellers for

  • advertising, bringing in additional streams of revenue.

  • Pandemic related success is just that it's a fluke.

  • It's a flash in the pan.

  • So far missed earnings in 2023 and the first quarter of 2024

  • are leaving investors with little doubt that the pandemic

  • may have been just that a fluke.

  • In December 2023, the company laid off 11% of its staff.

  • But as Etsy focuses on a comeback, it's also angering

  • some of its biggest stakeholders its sellers.

  • Etsy has been changing how buyers interact with the

  • platform to prioritize buyers buying more, faster and

  • staying on Etsy, not prioritizing buyers having a

  • good experience from individual sellers.

  • Chiarra Lohr leads the Indie Sellers Guild, a labor

  • advocacy group for Etsy sellers formed after a week

  • -long strike against the platform. Creators were

  • frustrated by yet another transaction fee increase and a

  • controversial star seller program that prioritized

  • sellers who meet requirements like fast shipping, high

  • ratings and quick response times.

  • And everything seems very corporatized.

  • It's almost as though you're penalized for not using Etsy

  • the way they're trying to make you use it.

  • Don't shut down my shop without letting me talk to a

  • person. Don't issue a refund to a buyer without getting

  • proof that it was damaged.

  • It's not drop your fees by half.

  • It's not get rid of offsite ads.

  • It's let me opt out if it doesn't work for me.

  • Kind of all those things accumulating to where they

  • find themselves heaping less and less of the money from

  • when they have a sale, but having to do more and more

  • work, not even in their craft of the thing that they make,

  • but just to make their Etsy shop work for them.

  • The company has said it had to make some tough changes to

  • compete with giants like Amazon, which spends more on

  • marketing and has more repeat buyers.

  • Its deteriorating reputation is another issue the company

  • is fighting. Sellers have blamed the 2013 rule change,

  • allowing creators to outsource their production for

  • what they call the "junk-ification" of Etsy.

  • This isn't a new problem, but one that some say has gotten

  • worse as the number of sellers grows.

  • I want to show you the the sadness on Etsy and what it's

  • become.

  • Legault went viral for her TikTok, exposing many of the

  • top Etsy shops as dropshippers or sellers who

  • make the designs but outsource the labor to another

  • company. Some designs are made with AI generated images.

  • Dropshippers are able to mass produce items like T-shirts,

  • stickers and stationery.

  • Others just sell supplies like beads.

  • In a comment to CNBC, Etsy said that it recognizes its

  • current definition of handmade, includes a broad

  • spectrum of items, and will clarify its policies to be

  • more transparent about what belongs on Etsy in the coming

  • months.

  • There are some like old school people in there, very few.

  • But, um, every click I was like, what is it?

  • Cups again, cups and then another.