Yahoo Finance

Etsy reporting stronger than expected revenue for its second quarter. Gross merchandise sales were in line with expectations, though they did fall 2% from a year earlier. The online marketplace is looking to boost sluggish sales with the planned rollout of its first ever royalty program. And joining us now is Etsy CEO Josh Silverman here with us in the studio. It's good to see you, Josh. Thanks for coming in.

Thanks for having me back.

So, um, indeed, we've talked about some revenue growth, gross merchandise sales falling a bit. And there seems to be a little bit of confusion on the street about the full year gross merchandise sales guidance, which I believe you guys pulled. You don't have that full year guidance anymore. Can you explain to us a little bit more about that decision or just how you're thinking about the rest of the year?

Sure. So we're pleased to see that we actually saw some modest acceleration already in the second quarter. We guided to low single digits for the third quarter, but things have just been very volatile and so we're really not comfortable giving a fourth quarter guide yet. We have an election that's been incredibly mindshare consuming and I expect, unfortunately, that that's going to get worse in terms of mindshare consuming. And the macro, you know, continues to be very volatile. We're pleased that in spite of what we think are very significant macro headwinds for discretionary consumer products, we've been maintaining our position. And we had 91 and a half million active buyers last quarter, about the very close to our all-time high while we're swimming upstream. And importantly, we think that this is only making our muscles stronger for when we come out of the recession, doubling down on the things that make Etsy the most special and importantly, resisting the urge to follow the race to the bottom. Most people in e-commerce right now are just all about deep discounting. That's not Etsy, it's not where we're going to win. We're really about highlighting the very best of Etsy. We've made enormous progress in that. We are excited about the progress we're making there, and we think that's what's going to make Etsy bigger and stronger for a long time to come.

The way that I use Etsy, um, is probably like a lot of viewers right now use it. So, if I want something really just kind of basic and general, honestly, I go to Amazon, right? That's my first stop. And then if I want something just cool and unique and different, I go to Etsy, whether it's for myself or, you know, maybe it's a gift, right? How do you think about that and how do you get, um, I don't know, consumers to think about that and maybe think about that differently?

Yeah, so great question. I think we've done an amazing job of becoming the very best place to go when you can't find it anywhere else. Whatever it is you have in mind, if you can imagine it, it is for sale on Etsy and can be made just for you, exactly to your specifications. We have a And by the way, for several years during the pandemic, there were a lot of things you wanted and couldn't find anywhere else, even if, you know, forget offline, even online places were out of stock. So tens of millions of people needed to come to Etsy to buy things that they couldn't find anywhere else. We're really proud of the fact that we've been made able to maintain nearly all of that volume, even now in a deep, uh, you know, what I think is a recession for consumer discretionary products right now. I think we're in one. We've been able to maintain nearly all that volume, but the opportunity for us now is to be a starting point for your commerce need. You can buy a cheap bookshelf somewhere else if you want, but the bookshelf that people are going to comment, you got from Etsy, that people say, well, that's such a cool bookshelf, where did you get it? That's only Etsy. And so instead of you needing to already know exactly what you need, I need this bookshelf of exactly these dimensions, we want you to come to Etsy when you're just thinking, I'm going to redecorate my office. I am planning a wedding. I'm having a baby. I need a gift for a friend. I'm planning Thanksgiving. And have us be having such an organized experience for you that we can take you through. Here's all the things we can do for you from that very high level, very let's say low definition need all the way to specifically the things that you want to buy. That's been hard because with over 120 million things for sale, none of which map to a catalog, organizing that in a way that people can understand is tough. But this is where LLMs are magical. They're really good at taking vast amounts of information and summarizing them and organizing them in a way that humans can understand. So the kinds of investments we're making right now, I think are really exciting for making Etsy a place you can start for all of your commerce journeys. This loyalty beta we're starting, um, right now, a loyalty program is really about asking people, hey, pay a small monthly fee and by committing to that small monthly fee, we think those people will then say, well, hey, I'm already paying the fee. I'll start all my shopping missions on Etsy and you're going to be surprised that we can deliver not only great stuff made just for you, but at good value as well.

I got from Etsy, yeah.

Right.

I want to double click on what you said about us being in a consumer discretionary recession, because that on the face of it seems to be pretty bad news for a company like Etsy. So you're doing these things like the loyalty program. When does it inflect for you then?

I think we've been the tip of the spear. I think we've been facing this for many quarters now. And now we're hearing, for example, Starbucks having a tough quarter, right? In the last recession, the last thing people gave up on was that cup of coffee. That was that affordable luxury. We're seeing, you know, McDonald's say that it needs a $5 menu meal now because paying full price at McDonald's is too much. So I think Etsy's been feeling the brunt of Wells Fargo published a survey recently saying 60% of Americans right now say that by the time they're done paying for their essential bills, they have very little left over for anything else.

So will you be one of the first to come out of it then?

I certainly hope so. And we are leveraging this moment to make Etsy even stronger, lean into what makes us different, celebrate the very best of Etsy, elevate the best sellers. We made huge progress with Etsy search just in this quarter on increasing the diversity of Etsy sellers, reducing duplication, and highlighting the best, the most artisanal, the most craftsperson-like, and that's a track of work we're really invested in right now. Behind every item at Etsy, there's a human. There's a real person who made that item or designed that item, and we're doing more and more to celebrate and center that seller and her work. I think that's going to pay off in spades, especially as we come through the other side of this cycle.

All right, Josh. Thanks so much for joining us today. That was great. Appreciate it.

Thank you very much.