Etsy Inc. faced another quarter of slowing sales on its marketplace in its Q2 earnings results as it grappled with competition and consumers feeling the pinch of inflation. For its second fiscal quarter ended June 30, Etsy reported a third consecutive drop in gross merchandise sales (GMS), though the year-over-year decline was less steep than in its first quarter.

Revenue rose 3%, thanks in part to Etsy’s new focus on promoting gifting through its ecommerce platform.

“While this is a challenging environment for our type of goods, we are focused on reigniting Etsy marketplace growth and gaining market share,” CEO Josh Silverman said in a statement reporting Etsy’s Q2 2024 earnings results.

Etsy is working to turn around its GMS decline by introducing new initiatives, including a paid Insider membership program set to launch in September. The company is No. 20 in the Global Online Marketplaces Database, Digital Commerce 360’s ranking of the 100 largest such marketplaces by third-party gross merchandise value (GMV). Etsy’s musical instrument marketplace Reverb is ranked No. 45, while its used-clothing marketplace Depop holds the No. 54 spot.

Etsy total GMV by year

Etsy Q2 earnings show revenue growth despite slowdown

During the second quarter, Etsy’s total GMS fell 2.1% year over year to $2.95 billion, marking an improvement from the 3.7% decline in Q1. GMS from Etsy’s marketplace alone, excluding Reverb and Depop, was $2.5 billion, down 3.2% from a year ago.

Despite the slowdown, consolidated revenue grew 3% year over year to $648 million, driven primarily by growth in marketplace revenue from payments and transaction fees from offsite ads.

A bright spot was a 4.1% rise in gifting gross merchandise sales on Etsy, buoyed by special occasions like Mother’s Day and Father’s Day. Gifting now accounts for about 27% of GMS and is outperforming some other online gifting-focused competitors, according to the company.

Silverman noted in the earnings call that Etsy’s consolidated results were at the high end or better than expected.

“While we continue to face stiff macro headwinds, we’re making meaningful improvements to the customer experience, which we believe are beginning to inflect the curve along our journey to get Etsy back to growth,” he said.

Also during the quarter, overall active buyers grew 0.4% year over year to 96.6 million, with international buyers continuing to rise. Active sellers rose to 8.8 million, up 5.9% from last year’s 8.3 million. For the Etsy marketplace, GMS per active buyer — a measurement of how much a customer spent in the trailing 12 months — dropped 3.2% year over year to $124. However, Etsy said this trend is stabilizing.

New Insider membership program for buyers

Etsy continues to see new competition as it pushes to correct course. The crafting-focused retailer Michaels launched its own MakerPlace marketplace in 2023, while upstart marketplace Temu is spending billions of dollars on marketing to attract shoppers in the U.S.

To help counteract this, Etsy introduced features in Q2 such as lists, reminders, occasion pages and gift teaser videos. Its “Made for You” microsite, which launched globally in June, showcases features like the Deals Tab and has already drawn hundreds of thousands of users, Etsy said. The features build on Etsy’s launch of an AI-driven “Gift Mode” for personalized gift ideas in January.

Also this week, Etsy revealed details of a new paid Insider membership program, launching in a closed beta to select U.S. buyers this September. Etsy Insider will offer perks such as free shipping, special offers, donation boosts, a birthday bonus and a limited edition annual gift designed by an Etsy seller.

“We’ll test, learn, and iterate, and are optimistic that over time, Etsy Insider can be a needle mover, driver of buyer frequency and Etsy love,” Silverman said.

Silverman also announced that Etsy’s CFO, Rachel Glaser, plans to retire soon. The company will start searching for her successor in the coming months. Glaser, who has been with Etsy since 2017, will stay on in an advisory role until June 30, 2025.

Other key numbers in Etsy’s Q2 earnings

For its fiscal Q2 ended June 30, 2024, Etsy Inc. reported:

• Total GMS of $2.95 billion, a 2.1% decline from $3 billion a year ago.
• Revenue of $647.8 million, up from $628.9 million.
• Net income of $53 million, down from $61.9 million.
• Marketplace revenue of $470.4 million, an increase from $453 million.
• Services revenue of $177.4 million, up from $175.9 million.

Check back for more earnings reports. Here’s last quarter’s Etsy report.

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