Shopping On Etsy Continues To Be Popular
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The world of online commerce is facing a brutal reality: during the pandemic, when many people were stuck at home, they went shopping online. Now that everything is back to normal, e-commerce sales are slowing down or falling.
Online shopping still popular
Buyers also did not give up shopping, even though they have been able to return to brick-and-mortar stores for a long time. Unlike Amazon, Etsy makes shopping personal - goods often come with a handwritten note. Unlike eBay, Etsy has a platform that feels up-to-date because many consumers have only recently discovered it.
Once a fringe online marketplace for crafters, Etsy gained widespread popularity during the pandemic. But unlike many Covid beneficiaries in the e-commerce space, Etsy has achieved gains that have thus far proven durable. Etsy reported more than 94 million active buyers as of the end of the third quarter—down less than 2% from its peak at the end of last year and roughly double the number it counted prepandemic.
Data
In November, Etsy reported that gross merchandise sales fell 3.3% in the third quarter compared to a year earlier - better than the 5.5% decline expected by analysts polled by Visible Alpha. It was also milder than the 11% drop eBay reported on the same day. Adjusted earnings before interest, taxes, depreciation and amortization margin was 28% better than expected.
Etsy added 6 million new buyers during this period, which was higher than the rate of adding new buyers before the pandemic. That's impressive considering the number of active Etsy buyers has more than doubled in the last three years to around 94 million in the last quarter.
This growth has been handsomely rewarded in the stock market, with stocks still up more than 40% over the last three years.
Etsy raised its transaction fee earlier this year by about 30%, but has since lost less than 4% of its sellers - numbers that speak to the exceptional value sellers seem to find on their platform.
Not everyone is convinced that Etsy's fortune will last. Following last month's third-quarter earnings, Morgan Stanley wrote that Etsy's growth outlook now appears "significantly different" from how it has been over the past three years, suggesting the stock now deserves a lower multiplier.
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Forecast
Etsy said in a Q3 conference call that it expects gross merchandise sales in the fourth quarter to decline by about 10% from a year earlier in the middle of the forecast, reflecting a "dynamic and somewhat unpredictable" market environment.
However, there is a good chance that the forecasts are conservative and the company may still surprise on the plus side. Etsy said business in October was even better compared to the same period before the pandemic than in Q3 on the same basis.
Development
The company is constantly investing in its website and app. The latest version is a feature that allows iOS users to upload a photo of an item they like - such as a cup of a certain shape - and search for similar ones. Meanwhile, the company has taken a slow and steady approach to hiring during the pandemic. This pace has no doubt helped Etsy retain talent as some other tech companies are shrinking fast.
Etsy share price
Since the pandemic, Etsy stock has been on the rise. There has been a decline this year. Although this year prices have fallen below 200, they are at a fairly high level, staying above 100 for a significant part of the year. Before the pandemic, prices were well below 100, trading around 50. For this reason, drops below 200 this year do not make the firam less attractive to investors. Currently, the Etsy share price is at 126.94.
Source: wsj.com,finance.yahoo.com
