3 Metrics That Prove Etsy’s Moat Is Growing
Etsy (NASDAQ:ETSY), the online marketplace for vintage and handmade goods, reported second-quarter results on Aug. 4 that exceeded Wall Street’s estimates. But the stock dipped as much as 13% following the news as investors weren’t pleased with management’s sales forecast for the current quarter.
It’s only natural that Etsy, like many other e-commerce businesses, will experience a slowdown as economies reopen and consumers resume normal spending patterns outside of a global pandemic. But rest assured, if we look past the market’s immediate reaction, we’ll find a company that is doing just fine.
Here are three key metrics showing that Etsy’s moat is only growing larger.
- Higher take rate
During the most recent quarter, Etsy’s take rate, the portion of gross merchandise sales (GMS) the company keeps as revenue, was 17.4%. This increased slightly from the prior-year period, and it highlights how much value the company is able to extract from the transactions it facilitates.
Viewing this metric as Etsy’s pricing power is an apt comparison. Over time, a business that provides more value through its services than what it charges customers has the ability to raise prices. And Etsy’s add-on services, like Etsy Payments and Etsy Ads, help the sellers on its platform by allowing them to run their small businesses.
“We look at take rate improvements as a value exchange, so where we can offer more services that […] benefit the seller, in exchange for some fee increase, we are open to doing those things,” CFO Rachel Glaser said on the earnings call.
The take rate was 15.9% during the second quarter of 2020, a period when revenue skyrocketed 137%, and the company was riding a pandemic surge. The fact that the most recent quarter’s take rate exceeded that extremely tough comparison is extraordinary.
- More users
As of June 30, Etsy counted 90.5 million active buyers on its platform, a 50% jump from the same period last year. And it had 5.2 million active sellers, up 67%. Having more users on the platform makes Etsy’s moat stronger thanks to the corresponding network effect.
The number of habitual buyers, those who shopped with Etsy at least six times and spent at least $200 during the trailing-12-month period, more than doubled in the quarter, and these are by far the company’s most profitable customers.
Etsy has thrived giving buyers the opportunity to support entrepreneurs who sell unique items. In a 2020 survey, 88% of Etsy shoppers agreed the site had items they can’t find anywhere else. That stat alone should tell you just how valuable it can be to its users.
- Increasing engagement
While the company has rapidly expanded its user base, buyers are also spending more on its platform. In the most recent quarter, GMS per active buyer (on a trailing-12-month basis) soared 22% from the year-ago period, a new record for Etsy. Again, it’s worth mentioning just how remarkable this is, knowing the year-over-year comparison Etsy is facing.
The business is riding the secular shift from brick-and-mortar retail to e-commerce, so as more people use the internet for their shopping needs, Etsy stands to benefit immensely. And with core operations in just seven markets currently (U.S., U.K., Canada, Germany, Australia, France, and India), it still has a massive runway ahead of it.
Additionally, the recent acquisitions of Depop (a global fashion reseller) and Elo7 (a Brazilian e-commerce business) only expand the company’s already huge $1.7 trillion market opportunity. They also add more opportunities for buyers and sellers to transact, all of which provide a nice tailwind for engagement to continue rising.
The trajectory of these three metrics demonstrates that long-term Etsy shareholders really have nothing to worry about. Even when compared to the monster performance in the second quarter last year, the business is still registering year-over-year gains, albeit at an unsurprisingly slower rate than during the pandemic.
Etsy is a stock I own, and I believe it will continue doing well for many years to come.
Tulsa woman’s startup crafting business thrives during pandemic
TULSA, Okla. — Sallie Dale is the CEO of “The Urban Acres.”
“I say CEO – Crafting Executive Officer.”
The entrepreneur used to be a high school art teacher, but when she and her husband were getting ready to welcome their first child, Dale found a way to be a stay-at-home mom, “I started selling kits at Christmas in 2019 and it really went well.”
Dale is the daughter of a cross-stitcher and granddaughter of a painter. She uses her talent to design punch needle patterns.
“I sell a kit that has all of the material, everything you need,” Dale said. “You open the box and you can start making.”
It turns out, her timing was perfect.
“And then 2020 hit and everyone was looking for something to do at home,” she said.
Because of the pandemic, Dale’s Etsy business, “The Urban Acres,” thrived. Kits were selling like hot cakes. People who had never heard of punch needling were learning this very old craft.
“It’s always been a way historically for women, specifically, to express creativity,” Dale said.
“But also to provide income to their family.”
2 News Oklahoma The entrepreneur used to be a high school art teacher, but when she and her husband were getting ready to welcome their first child, Sallie Dale found a way to be a stay-at-home mom.
Photos: Tulsa woman’s startup craft business thrives during pandemic
Dale now employs other moms who help build the kits.
“Moms come pick up yarn at my house, they take it home, they wind it up and drop it off,” she said. “So they get to spend time with their kids and make money.”
Dale calls her designs a modern revival of punch needle and says it’s something anyone can do. She’s now expanding her designs and will include traditional embroidery kits soon. Her kits are sold worldwide on her Urban Acres website and in retail stores across the U.S.
“I’ve got a store in Australia that carries my kits, and Canada,” she said. “It’s way bigger than I ever thought it would be.”
So big, her husband is saying goodbye to his career to help build the business. He wants to stay home with the three most important things in his life: his two children and the Crafting Executive Officer of The Urban Acres.
“I want to be home with my kids,” Dale said. “I never thought that it would provide a way for other people to be home with their kids, and now it is. So it’s very rewarding and exciting.”
Check out “The Urban Acres” on Etsy here.
Visit the Urban Acres website here.
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