Subtitles section Play video Print subtitles 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.