In the second quarter of 2020, as the Covid-19 pandemic kicked off in earnest and personal protective equipment grew scarce, face masks accounted for a whopping 14% of gross merchandise sales (GMS) on handmade-goods platform Etsy. By the third quarter, masks would account for 11% of GMS, and by the fourth quarter that would fall to 4%—but by then millions of one-time mask buyers had already become Etsy return visitors.
On Thursday, Etsy reported fourth-quarter earnings that blew past analyst expectations, including a 129% year-over-year increase in revenue (which hit $617 million) and a 375% year-over-year increase in net income ($148.5 million). For all of 2020, Etsy’s profit more than doubled, and GMS grew by 106%. The company also said that nearly half of the 3 million customers who only bought masks on the site in the third quarter came back to Etsy in the fourth quarter to buy other items. CFO Rachel Glaser called it “a great signal” for the company’s ability to retain buyers, and well as its future growth.
“That really shows that the new buyers that we’ve obtained and the ones that we’ve reactivated are really exploring Etsy and understand the breadth of products that we have,” Glaser said in an earnings call with analysts on Feb. 25.
Etsy’s pandemic success
With its focus on small businesses and independent artists, Etsy has benefited from the pandemic-driven shift to online shopping and unemployment-driven growth in entrepreneurship. Initially a seller of vintage, handmade, and creative goods, the company last year expanded to home furnishings, event decor, and of course millions of handmade masks.
Etsy is now the fourth largest retail e-commerce site after Walmart, Target, and Amazon. Here are some other highlights from its most recent earnings report:
- Nearly half of buyers on Etsy (48%) made two or more purchases last year, with the average number of sales growing to five purchases per user.
- Extended lockdowns drove growth in the UK, particularly for purchases where both the buyer and seller were local.
- Etsy’s home furnishing sales have benefited from the pandemic redecoration boom, but the company remains “a tiny part” of the overall market, Etsy CEO Joshua Silverman said.
- Wedding sales grew by 30% year-over-year in 2020. On the earnings call, Silverman said that once in-person groups are safe again, the events category presents “an enormous amount of opportunity for Etsy to grow.”
What’s next for Etsy?
The company’s 2021 is off to a strong start, thanks in part to Bernie Sanders. An image of the US senator bundled up during the inauguration ceremony for president Joe Biden became an incredibly popular meme, with extra attention placed on his handmade mittens. The school teacher who crafted the original pair, Jen Ellis, was flooded with requests.
Glaser said the interest prompted a “blowout sale” on Etsy for similar mittens, plus items featuring illustrations of Sanders. The site benefitted from a similar surge of interest when US Supreme Court justice Ruth Bader Ginsburg died, as buyers sought out merchandise bearing her image. And the company’s stock soared in late January after Elon Musk tweeted that he had used the site to purchase a hand-knit wool item for his dog.
Etsy expects first-quarter 2021 revenue to be between $513 million and $536 million, compared with analyst expectations of $383 million. But the company declined to offer guidance for the full year.
“While Etsy’s growth in 2021 is likely to decelerate off of last year’s high levels along with the rest of e-commerce, we have more conviction than ever to invest in our business for the long-term, building top of mind awareness in the hearts and minds of consumers, with an ambition to outperform e-commerce and gain market share,” Silverman told CNBC.