Etsy relies on its mobile application as ongoing declines continue
Etsy Shifts Focus to AI-Driven Growth Strategy
Etsy, the popular online marketplace known for its unique and handmade items, has announced a new growth strategy aimed at transforming its flagship marketplace into an AI-driven, experiential hub.
In the second quarter of this year, Etsy's gross merchandise sales (GMS) on its flagship marketplace experienced a decline of 4.6% to $2.4 billion, marking a 4.8% overall drop compared to the same period last year, reaching $2.8 billion. However, revenue rose by 3.8% to $672.7 million.
Despite the decline in GMS, Etsy's mobile app has shown significant growth. In Q2, GMS on the marketplace app outpaced non-app GMS and reached nearly 45% of total GMS. This shift towards a more mobile-focused approach is part of Etsy's plan to create a more experiential, browsable environment enhanced by large language models (LLMs) that personalize shopping and act as AI personal shoppers.
Etsy's new strategy includes a shift to streaming marketing, partnerships with influencers and social platforms, retooling search ranking models using generative AI, and highlighting sellers on the platform.
The company is leveraging AI-powered personalization and discovery on mobile, personalized marketing, social and influencer engagement, stronger seller tools, and advanced generative AI search ranking to accelerate engagement and growth on its flagship marketplace.
Etsy is also focusing on creating more diverse and engaging recommendations by scoring items across a broad range of interests and clustering them to capture nonobvious connections. This approach aims to understand listings, users, and their activity more deeply to deliver better search results.
In addition, Etsy is partnering with Apple to integrate its inventory with iOS’s visual intelligence features, expanding AI-driven discovery beyond Etsy's platform. This move provides convenience and enhances Etsy’s appeal as a unique shopping destination.
Etsy's smaller U.K.-based Depop marketplace also showed growth, with GMS increasing by 35.3% to $249.6 million in Q2.
Despite these efforts, the number of active buyers at Etsy overall dropped by 3.4% to 93.3 million in Q2, and the number of active buyers on Etsy's flagship marketplace decreased by 4.6% to 87.3 million in Q2. However, net income for Etsy reached $28.8 million in Q2, albeit a decrease of $24.2 million compared to last year.
Etsy's CEO, Joshua Silverman, stated that the company's mobile app is key to improving its flagship marketplace. The company is also working on simplifying shop operations for sellers and making product listings more discoverable by optimizing keywords, images, and descriptions.
The company has also completed the sale of Reverb, a musical instrument site it acquired six years ago, and Rafe Colburn, Etsy's Chief Technology Officer, is newly returned to the company.
[1] Source: Etsy Investor Relations, Q2 2022 Earnings Call Transcript [2] Source: Etsy Investor Relations, Q2 2022 Press Release [3] Source: Etsy Investor Relations, Q2 2022 Shareholder Letter [4] Source: Etsy Investor Relations, 2025 Strategies Update [5] Source: Etsy Investor Relations, Seller Tools and Services Update
- As part of Etsy's AI-driven growth strategy, the company will collaborate with Apple to integrate its inventory with iOS’s visual intelligence features, extending AI-driven discovery beyond Etsy's platform, enhancing its appeal as a unique shopping destination.
- In the pursuit of a more immersive shopping experience, Etsy plans to leverage advanced generative AI to retool search ranking models, personalize marketing efforts, and deliver more diverse and engaging recommendations to understand listings, users, and their activity better, improving search results.
- Etsy's focus on technology is evident in its business strategy, as the company aims to create a more experiential, browsable environment on its mobile app, supported by large language models (LLMs) that function as AI personal shoppers, driving growth and engagement on its flagship marketplace.
