Can Anything Save Etsy?

Published: Sunday, May 4, 2025 at 12:15 pm

Etsy's Troubles: Can the Online Marketplace Bounce Back?

Etsy, the online marketplace beloved for its handmade and vintage goods, is facing a tough time. After a pandemic-fueled boom, the company's stock has been on a downward slide, leaving investors disappointed. The latest earnings report revealed further struggles, with gross merchandise sales (GMS) down 6.5% to $2.8 billion in the first quarter. This decline is part of a larger trend, as both active sellers and buyers are decreasing.

One major issue is Etsy's acquisition strategy. The company attempted to build a "House of Brands" by acquiring sub-brands like Reverb, Depop, and Elo7. However, these acquisitions have largely failed, resulting in losses and distractions from the core Etsy business. Reverb has already been sold at a loss, and the company took a $1 billion impairment on Depop and Elo7.

Another significant challenge is the exodus of sellers. A 23% drop in active sellers over the past year highlights the problem. Increased seller fees, with Etsy's take rate climbing to 23.3% in Q1 2025, are likely a contributing factor. Concerns about the platform being diluted by non-handmade goods also play a role.

Etsy's management is focusing on metrics like app usage, but the underlying problems persist. The company needs to address the decline in GMS and attract more sellers. Activist investors, like Elliott Management, have taken stakes, but haven't been able to turn the tide. An acquisition by a company like Shopify or Target, or a complete overhaul of management, may be necessary for Etsy to recover.

BNN's Perspective: Etsy's situation is a classic example of a company struggling to adapt after a period of rapid growth. While the pandemic provided a boost, the company's subsequent missteps, particularly with acquisitions and seller fees, have eroded its position. The focus should be on retaining and attracting sellers, which is crucial for the platform's long-term success. A strategic shift is needed to regain investor confidence and ensure the platform's relevance in the competitive e-commerce landscape.

Keywords: Etsy, ETSY, stock, e-commerce, handmade, vintage, sales, GMS, gross merchandise sales, sellers, buyers, Reverb, Depop, Elo7, acquisition, seller fees, take rate, Elliott Management, Shopify, Target, online marketplace, earnings, management, turnaround, activist investors.

Full Coverage