Etsy Sales Decline Due to High Inflation Undermines the Growth Seen During Covid Lockdowns

Etsy Shop

E-commerce artisan marketplace Etsy is at a crossroads, trying to balance declining gross merchandise sales, a tumbling stock price, and high inflation with the needs of its 7 million sellers.

“After the big increase in both buyers and spending per buyer during Covid, it looks like they’ve hit a wall,” said Jason Helfstein, a managing director at Oppenheimer & Co.

Etsy’s first-quarter results were disappointing: gross merchandise sales (GMS) fell, its consolidated marketplace revenue was flat with year-over-year growth of just 0.8%, and the company’s net income was $63 million, compared to $74.5 million in the same quarter the previous year. Shares sank 15% the day after the report.

Etsy Shop

Etsy CEO Josh Silverman attributed the tough quarter to consumers’ continued reduction in discretionary spending. “That made it harder than we expected to bend the curve, which was disappointing,” he said during the company’s earnings call.

These challenges starkly contrast with Etsy’s performance less than three years ago. The Covid pandemic brought Etsy new customers and a massive sales boost; its stock price reached an all-time high of $296.91 on Nov. 24, 2021. GMS grew 106.7% year over year in 2020, and an additional 31.2% in 2021.

The number of active users on Etsy’s platform has increased almost 70% since 2019, but purchases haven’t followed.

Etsy Shop

As of the first quarter, the site had 91.6 million active buyers and 7 million active sellers. “It just looks like there were one-time purchases in 2021 that just did not repeat,” said Helfstein. “The question really is: What is the Etsy story?” he added.

Artisans point to other long-term changes they say have altered Etsy’s culture and affected their sales, such as higher transaction fees and programs that push them to pay for ads, offer free shipping, or respond to every message within 24 hours.

“They find themselves having less and less of the money from when they have a sale, but having to do more and more work, not even in their craft of the thing that they make, but just to make their Etsy shop work for them,” said Chiarra Lohr, executive director of the Indie Sellers Guild and a former Etsy seller.

Nate O'Hara
Nathan is a seasoned commerce writer with a passion for unraveling the intricacies of the business world and distilling them into engaging narratives. During his academic journey, he delved deep into subjects like economics, marketing, and entrepreneurship, honing his analytical skills and developing a keen understanding of market dynamics.