This is Etsy Inc.'s highest growth since 2013, thanks in part to its 2019 acquisition of Reverb, an online marketplace for music gear. Key initiatives like free shipping and a record-setting holiday season also helped boost sales last year.

Etsy Inc. sold $4.97 billion worth of goods in 2019, up 26.5% from $3.93 billion in 2018. That total includes sales on Etsy.com, its online marketplace for handcrafted goods, and its marketplace Reverb.com, a platform for music gear and instruments.

Not counting sales from Reverb, Etsy’s marketplace grew approximately 19.6% to $4.7 billion in 2019, according to the company’s year-end earnings release. Etsy, No. 16 in the Digital Commerce 360 Online Marketplaces database, purchased Reverb (No. 35) in July for $275 million.

Etsy’s gross merchandise sales grew more than 20% in 2018 and 2019 after hitting a low 14% growth in 2017.

Etsy pointed to a strong holiday season and free shipping initiatives as key drivers for growth in 2019. The total sale of goods on Etsy’s marketplaces, which Etsy calls gross merchandise sales, increased 30% year over year during the five days between Thanksgiving Day and Cyber Monday, the marketplace says. Cyber Monday 2019 and the Tuesday after Cyber Monday were the two highest sales days ever for Etsy. In the fourth quarter ended Dec. 31, gross merchandise sales grew 32.0% to $1.65 billion from $1.25 billion in the same period of 2018. This includes sales on Reverb.com.

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In July, Etsy launched a new program to help its sellers offer free shipping to U.S. buyers on orders of $35 or more. The program is a free shipping guarantee, which lets U.S. shoppers know they won’t pay shipping costs on orders totaling $35 or more. Items that ship for free and shops that offer free shipping for the $35 threshold are prioritized in Etsy’s search: Products that ship free are on the top and most visible rows of search results.

Sellers don’t pay Etsy anything to participate in the free shipping program that prioritizes items in search results, but it is a cost either sellers absorb or pass onto the consumer by raising prices.

Etsy seller and online retailer Dog Christmas Stockings added free shipping two years ago to its products on Etsy.com, before Etsy added the free shipping threshold. The retailer, which sells personalized Christmas stockings for pets, raised its prices so it could offer free shipping without squeezing its margins.

“We used to have cheaper prices and charged shipping. We not only saw lower conversion rates, but we had quite a few people contact us asking if they could get free shipping,” marketing manager Jeff Moriarty says.

After it added free shipping, it saw higher conversion rates, Moriarty says. The conversion rate jumped to 1.50% from 0.50% two years ago. Dog Christmas Stockings increased prices of its stockings to $39.95 from $34.95.

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Free or discounted shipping is the No. 2 reason shoppers make a purchase on a marketplace versus going directly to a retailer’s site, according to a Digital Commerce 360/Bizrate Insights survey of 1,108 online shoppers in May.

At the end of 2019, 65% of U.S. gross merchandise sales shipped for free, 74% of U.S. listings viewed by consumers were eligible for free shipping and 48% of orders were delivered for free, Etsy says. Items under $35 don’t usually ship for free and those have higher conversion rates, CEO Josh Silverman says about the disparity between 74% of listings viewed with free shipping but only 48% delivered.

Etsy is increasingly generating revenue from services it offers sellers. Total revenue, which Etsy generates from listing fees, seller services and commission on sales, jumped 35.6% to $818.38 million from $603.69 million in 2018. Seller services revenue, which Etsy receives from such services as promoted listings, credit card processing and web services, grew 41.4% last year. The rest of its revenue, which Etsy calls marketplace revenue, increased 33.5%. Marketplace revenue comes from the 20-cent listing fee Etsy charges and the 5% commission it takes on every sale and accounted for roughly 72% of total revenue.

There were 2.69 million active sellers at the end of the year, compared with 2.11 in 2018. Etsy made 58% of its sales on mobile devices. 36% of sales were from outside of the U.S.

Etsy executives also addressed the growing concern of the Coronavirus, stating that only a small percentage of supply and demand is in China, so it hasn’t had much of an impact on Etsy sellers yet.

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