Etsy tumbles as consumers prefer cheap products to personalized
The brief momentum in AI-enhanced artisanal selling recommendations sputtered.
Etsy’s fourth-quarter revenue miss on declining holiday sales sent the stock tumbling by more than 7% in the premarket.
The online marketplace reported a record $852.2 million in quarterly revenue ahead of market open on Wednesday, eking out a 1.2% gain from a year before but missing forecasts of $861.9 million, according to analysts polled by Bloomberg.
The volume of sales on the company’s marketplaces, which include secondhand clothing site Depop and musical instrument retailer Reverb, fell 6.8% year over year to $3.74 billion, missing estimates of $3.86 billion and marking a third year of declining holiday sales for the company.
The Etsy marketplace itself saw particularly steep declines, with sales down 8.6% from a year earlier. Investors had hoped the site’s AI-powered “gift mode,” which suggests presents from the site’s listings based on the occasion and recipient’s interests, might help reinvigorate holiday sales. The feature, released early last year, helped fuel a brief surge in the company’s stock after showing early signs of success in Q3 results.
The sales miss comes as Etsy’s sales and shares have come under pressure in recent years amid surging popularity for ultracheap retailers like Temu and Shein, with the stock losing about 80% of its value since a pandemic-era peak in 2021. In response, Etsy has aimed in recent quarters to differentiate itself as a strictly handmade marketplace, but an uncertain economic outlook and inflation-weary consumers have remained a challenge. As it turns out, people aren’t keen to make discretionary purchases like personalized art or a hand-knit scarf when their budgets are already stretched.
Going forward, the company expects total gross merchandise sales to decline by a similar year-over-year rate in the first quarter, with “several factors” that should align for improved performance afterward, according to the company’s new CFO Lanny Baker, who offered no details on what those factors might be.
Kelly Cloonan is a journalist who has written for Business Insider and Fast Company.
