Etsy Inc. released its Q3 earnings on Wednesday, revealing a mix of hurdles and growth opportunities as the online marketplace focuses on improving the customer experience to drive long-term gains.

For Etsy’s fiscal third quarter ended Sept. 30, 2024, the marketplace’s gross merchandise sales (GMS) — the total value of items sold on its platforms — fell 4.1% to $2.92 billion, down from $3.04 billion in the same period a year earlier. This marks the fourth consecutive quarterly decline in GMS.

On a more positive note, Etsy’s revenue rose 4.1% year over year to $662.4 million, up from $636.3 million in Q3 2023. The growth was driven by gains in both Marketplace and Services revenue, with payments boosting Marketplace performance and Etsy Ads driving Services revenue higher.

“While 2024 has been a challenging period for discretionary goods, we are investing with discipline and focus to make Etsy even more Etsy — which we believe will lift our boat when the tide comes back in again,” CEO Josh Silverman said in the earnings release.

Etsy total GMV by year

During the Q3 earnings call, Silverman outlined the steps Etsy is taking to improve the shopping experience. Initiatives include positioning Etsy as a top choice for gift shopping, refining search capabilities, rolling out a new loyalty program in beta, investing in its mobile app, and reducing shipping times and costs.

Etsy 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’s active buyer retention remains high in Q3 earnings

Etsy continues to focus on improving its marketplace experience to attract and retain buyers and sellers, even as the broader market for discretionary goods faces headwinds.

For Q3 2024, GMS from Etsy’s main marketplace, excluding Reverb and Depop, was $2.5 billion, a 6% decrease year-over-year.

However, the platform maintained 91.2 million active buyers, with only a slight 0.4% decline from last year. Etsy reported reactivating 6.4 million buyers, a 5.6% increase year-over-year, and adding 5.3 million new buyers. Active buyer retention remained above pre-pandemic levels on a trailing twelve-month basis, the company noted.

However, GMS per active buyer on a trailing twelve-month basis fell 3.4% year-over-year to $123, a drop Etsy attributes to buyers visiting the site less often and spending less per purchase, chief financial officer Rachel Glaser said during the earnings call.

On the seller side, active sellers on the Etsy marketplace totaled 6.2 million, down 8.5% year-over-year and down from the prior quarter. Glaser said the decline aligns with Etsy’s focus on quality, as the company introduced a new seller setup fee and strengthened enforcement measures “to ensure that the right sellers, those with the skill and will to succeed on Etsy, can win.”

Etsy prioritizes long-term growth with improved search and seller tools

Instead of chasing quick wins in metrics like conversion rate and GMS, Silverman said Etsy is focused on building a strong foundation for long-term growth.

Earlier this year, Etsy started refining its approach to search rankings, putting more weight on listing quality. The results have been encouraging – a 30-day experiment in July and August showed an increase in four- and five-star reviews across the platform, along with fewer refund requests.

The company also worked to diversify the merchandise shown to buyers, with a goal to reduce the “cognitive load” that comes from seeing too many similar items in search results. The effort led to a 67% drop in searches with four or more identical listing images on the first page, Etsy said.

To give sellers more insight and control over their search performance, Etsy also launched the Etsy Search Visibility Page. The new tool provides sellers with tips to improve their search rankings, offering guidance on factors like listing image quality, return policies, response times, and shipping prices.

Etsy pushes app adoption and gifting tools

In September, Etsy rolled out Etsy Insider, a paid membership program, inviting a select group of occasional buyers to join. Insider members enjoy perks like free shipping, special offers, donation boosts, a birthday bonus, and an annual limited-edition gift crafted by an Etsy seller.

Most sign-ups for Etsy Insider have come through the Etsy app, which is showing promising growth. Silverman said that when a buyer downloads the app, their lifetime spending on Etsy increases by at least 40%, yet currently, less than half of Etsy’s GMS is transacted through the app. “There’s tons of untapped potential,” he said.

As part of its push to make the app the core shopping experience, Etsy introduced more prominent prompts on the mobile web to encourage app downloads.

Etsy is also doubling down on its position as a go-to destination for gifts. During Q3, the company expanded its Gift Mode tool, tripling the number of curated Gift Ideas available to buyers. Gift Mode combines AI with human curation to help users find relevant gift options, and Etsy reports that U.S. survey data shows its association with gifting hit an all-time high in Q3.

To further boost visibility in the gifting space, Etsy launched physical gift cards in popular U.S. retail locations and online at Etsy.com for U.S. customers.

Other key numbers in Etsy’s Q3 earnings

The company announced that its board approved an additional $1 billion share repurchase program following the buyback of approximately $156 million, or 2.7 million shares, of Etsy’s common stock in Q3.

For its third quarter ended September 30, 2024, Etsy Inc. reported:

• Total GMS $2.92 billion, a 4.1% decline from 43.04 billion a year ago.
• Revenue of $662.4 million, up from $636.3 million.
• Net income of $57.4 million, down from $87.9 million.
• Marketplace revenue of $476.1 million, an increase from $460.9 million.
• Services revenue of $186.3 million, up from $175.4 million.

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

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