Etsy Q4 and Full-Year 2022 Financials are Solid — Including Key Active Buyer and Seller Metrics

Etsy released its fourth quarter and full-year earnings report for 2022 on Wednesday. Let’s look at some top numbers interesting for Etsy sellers, and then I’ll dig deeper into the earnings call, where the company discussed its financials and operations.

Fourth Quarter 2022 Financial Highlights:

• Total Gross Merchandise Volume (GMV)¹: 4.0 billion, down 4% Year-over-Year (YoY)
• GMV United States: $2.2 billion²
• GMV International: $1.8 billion²
• Revenue: $807 million, up 12.6% YoY
• Net Income (loss): $109.4 million, down 32.2% YoY
• Active Buyers: 89.4 million, down 0.8% YoY
• Active Sellers: 5.4 million, up 1.9% YoY

Full Year 2022 Financial Highlights:

• Total Gross Merchandise Volume (GMV): 13.3 billion, down 1.3% YoY
• GMV Etsy.com: $11.8 billion³, down 3.2% YoY
• GMV Reverb: $942.5 million³, down 0.6% YoY
• GMV Depop: $552.1 million³, up 87.5% YoY
• GMV Elo7: $69.7 million³, up 117.8% YoY
• GMV United States: $7.32 billion²
• GMV International: $5.98 billion²
• Revenue: $2.56 billion, up 10.2% YoY
• Net Income (loss): ($694 million), down 240.7% YoY
• Active Buyers: 89.4 million, down 0.8% YoY
• Active Sellers: 5.4 million, up 1.9% YoY

¹Etsy calls this metric GMS, or General Merchandise Volume. However, it’s the same as General Merchandise Volume (GMV), a term used more frequently by marketplaces.
²These numbers were calculated from Etsy disclosing that 45% of its GMV is from non-US transactions, full year and in the fourth quarter.
³Etsy did not disclose fourth-quarter GMV for its individual marketplaces. Etsy.com represented 88% of total GMV in 2022, making it the primary source of GMV by the company.

First Impressions: While Etsy’s fourth quarter and full-year GMV is down slightly, it’s nothing to be concerned about, as macroeconomics is likely to blame here.

Most ecommerce retailers and marketplaces saw headwinds last year from consumers curbing spending on non-essential products due to inflationary pressures on their pocketbooks.

Despite overall good numbers, some may wonder why Etsy recorded a loss for the full year of 2022. The company explained that is mostly from a goodwill impairment charge of $1.0 billion from Depop and Elo7.

Etsy Earnings Call Highlights

During the last evening’s earnings call, Etsy CEO Josh Silverman and Etsy CFO Rachel Glaser revealed additional metrics¹ describing Etsy’s business in more detail. I picked the most important ones that sellers may be interested in.

Business Size: Etsy is now about 3x the size they were pre-pandemic
Live Listings: Over 120 million
Buyer Diversification: 22 million active buyers identified as male at year-end, up 124% since 2019
Buyer Reactivation: 24 million buyers who lapsed over the prior 12 months came back to Etsy, the most the company ever reactivated.
New Buyers: 9.5 million in Q4
Habitual Buyers⁵: 7.4 million, 40% of Etsy.com GMV in Q4
Repeat Buyers: 36 million
Non-US Active Buyers (total): 34 million
Germany: GMV in double-digit growth, now 4x larger than 2019
India: Over 120,000 sellers with 5 million listings
Collections: 20% increase in items added to collections
Shop Follows: 36% increase in users following shops
Returns: 30% of listings displayed a return policy, up from 10% when Etsy started to encourage sellers to include return policies in their listings

⁴These metrics are supportive business data revealed during the earnings call. They are not typically included in the published earnings reports by Etsy. Unless noted as “in Q4,” data is for the full or end of year 2022.
⁵Habitual buyers make at least 6 purchases on Etsy, spending a minimum of $200 annually.

Now let’s take a look at a few quotes from the earnings call.

Quotes from Josh Silverman, CEO, Etsy

”On Holiday Season Shopping: “[GMV] grew year-over-year on a currency neutral basis during Cyber 5. We had particularly strong days on Small Business Saturday and Giving Tuesday, supporting our belief that buyers associate Etsy with shopping small and making a positive impact.”

On Etsy.com: “Investment in our core Etsy marketplace has really paid off, and you saw that as we went through 2022, maintaining most of our gains in the face of enormous headwinds.”

On Buying Experience: “We made the Etsy buying experience more efficient. Improvements in the search experience drove lift in site-wide conversion rate and average buyer spend.

“We reduced page load times in search, which were cut by nearly one full second. These and other performance wins in 2022 drove nearly $100 million in incremental site-wide [GMV].”

On Improving Search: “The neuro models we’re using, use the same kind of underlying algorithms that ChatGPT uses. So, we’re already using some of the underlying technologies that you’re seeing from great innovators like Open AI, and it’s having great impact.

“…every time that [the] search team develops a new model, a new algorithm, we look at how much extra processing power has it used. And therefore, how much extra cost has it added? And how much does it improve conversion rate and the lifetime value of the buyers? And is that profitable to ramp-up? And we only ramp-up things where the benefit it adds is greater than the cost.”

On Branding & Marketing: “We’ve been getting strong returns from our brand spend in terms of in-period [GMV] as well as lifetime value of buyers.

“In addition to top of funnel brand work, we’ve deepened our investments and elevated effort throughout the funnel.

“Our team delivered $100 million in incremental annualized [GMV] by improving the data feeds to our advertising partners and affiliate channels, improving search engine optimizations.

“And fun fact, we drove about $100 million in incremental annualized GMS just from improving our e-mail campaigns.”

“We’re launching a new television campaign in the next week or two, and you’re going to see us really talk about home, fashion and gifting very explicitly.”

On Etsy Purchase Protection: “Etsy Purchase Protection is coming in right around our cost estimates, maybe even a little less and that suggests that our sellers are doing a great job. They are shipping on time. The item is as described.

“It is arriving not damaged to the vast majority of the time. So we don’t have as many chances to prove that we have your back because of the fact that sellers are generally doing a great job.”

“…the time to fix an issue has gone down so dramatically just in the past few months as a result of the Etsy Purchase Protection Program.

“We’ve gone from days to hours in terms of how long it takes to resolve an issue. And as a customer, that’s a great experience. You have an issue, you contact customer support. And in the first contact, it’s resolved, we give you a refund, and you move on.”

On Reverb: “Reverb invested in optimizing conversion rate, delivering a more customized experience to different types of music makers and driving international growth.

“Reverb maintained the vast majority of its pandemic gains in 2022 and continued to meaningfully outpace the musical instrument market on a three-year basis, yet still represents less than 4% of the total musical instrument market.

“Some of the things that they’ve been working on recently that I think are really cool is partnering directly with brands, so that those brands are launching limited-edition exclusives on the Reverb site.

“Another insight that they’ve had is that not all of the inventory is priced right because we saw so much inflation through 2021, and supply chain is backing up, and now prices have settled back down again for many items.

“And sellers may not have gotten the memo, and so they may have items that are priced for what looked like an attractive price nine months ago that looks very expensive today.”

On Depop: “Depop has become a community-powered fashion marketplace to buy and sell unique fashion with approximately 30 million registered users.”

“Similar to Reverb, actually, affordability is a big area that they are working on and making sure that sellers are selling items at prices that feel good to buyers.

“The competitive landscape for Depop is more challenging. Right now, there is a lot of competition in the recycled clothing market. And the U.K. economy has been a headwind.”

On Elo7: The easing of the Covid-19 pandemic in Brazil last year led to a resumption of consumer mobility and, therefore, a return to in-person celebration in events, Elo7’s sweet spot, and the business began to see some performance improvement.

“We believe that Elo7 can expand its consideration set in the mind of Brazilian consumers, becoming a destination they turn to more frequently for more of life’s special moments.”

On the Indian Market: “…we want to invest in India in a sustainable way, and so making sure that we do it in a way that supports organic growth over time and doesn’t just flood the market with a lot of investment that either succeeds or fails in a short amount of time. And then if it doesn’t work, we pull out with our tail between our legs.”

Quotes from Rachel Glaser, CFO, Etsy

On Marketplace Development: “Product development spend as a percentage of revenue was 16% for 2022 … similar to our pre-pandemic range and at what we believe is in a healthy range for sustainable growth and profitability.”

On Marketing: “Consolidated brand spend increased 12% year-over-year as we ran new Etsy TV and digital video campaigns in our top three core markets [U.S., the UK, and Germany] during the important holiday selling season.”

On Offsite Ads: “Our offsite ads revenue offset approximately 35% of Etsy marketplace performance marketing spend, allowing us to put more dollars to work on behalf of our sellers.”

On Short-Term Business Outlook: “In a stable macro environment, the math would suggest a return to GMS growth rates in the teens in the second half of this year. However, the data and information we are seeing so far in 2023 related to consumer spending shifts and pressure from the macro environment makes us very cautious.”

On Reverb Financials: “Reverb is just at about hovering around breakeven.”

On Depop Financials: “…we’re investing for growth. It would be really the wrong thing to do to starve them at this point.”

On Elo7 Financials: “Elo7 is not yet profitable, but they’re also too tiny to matter or make any kind of material impact to our overall margins.”

Final Thoughts

I find Etsy’s earnings call was far more candid about its operation than eBay, which we posted earlier today. A lot of interesting insight into their growth and where it is occurring.

Josh Silverman did address the Citron Research report from last week that accused the marketplace of being “the largest organized clearing house for counterfeit goods.”

You can read more about it here, and I did not include his comments in this article but will have another more in-depth look at this problem in the coming days and what he had to say about it.

Last year, the most controversial action by Etsy was increasing its selling fee by 30%, which led to an Etsy Strike by some sellers. As I questioned then, I felt the strike really wasn’t going to make that much of a difference to the company, and looking at the full year’s financials, it’s pretty safe to say, it didn’t.

However, the big elephant in the room is that Etsy’s marketplace revenue in 2022 grew dramatically because of the fee increase. So, while the grievances — which included other areas, not just the fee increase — were valid, ultimately, most sellers didn’t flee the platform.

When you are selling on a marketplace, you are playing by their rules. If you don’t like the rules, you are free to leave, but it seems there were plenty of sellers willing to stay or even come on board to find opportunities on Etsy.

I really like how Etsy broke down some buyer segments in this report, providing a more detailed macro look at its buyer base. The company also has been consistent in defining its habitual buyer, again, making it a lot easier to understand the value of that cohort.

While I brought up some quotes about the development Etsy has planned, it’s really only a small glimpse. The company seems really poised to continue to improve the platform for buyers through AI.

But this also means sellers will have to adapt their listings to ensure they have the details that the Etsy search algorithms can understand and surface to interested buyers.

Etsy’s overall financials are solid, and the company continues to invest in its core platform. Sellers struggling on the platform probably need to look at their competition and how their listing quality and selling policies match up with theirs.

While collectively, Etsy’s three small divisions are a drag on its financials, the impact appears to be low. On the positive side, GMV grew significantly at Depop and Elo7 YoY. Reverb, on the other hand, the largest contributor of GMV to Etsy, is stagnant. But there appears to be still good upside potential.

For a complete look at Etsy’s fourth-quarter and full-year financials, please visit the Etsy Investor Relations page. It provides additional financial context not included here that is important for investors.

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