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Why Etsy Continues to Grow Its E-Commerce Business

Despite a slowdown in revenue growth, Etsy reported another solid earnings report in Q3. The value of merchandise sold on the platform and resulting revenue for the company both increased 18% year-over-year to a respective $3.1 billion and $532 million during the third quarter of 2021. This was still a considerable increase factoring in last year's boom of sales during initial pandemic lockdowns.

For instance, if you set aside the hundreds of millions of dollars-worth of face masks sold last year alone on Etsy, the increase would have been 24% year-over-year in Q3.

Clearly, though activity is starting to normalize and in-person shopping makes a comeback, Etsy’s e-commerce business is still growing at a rapid pace. Here’s three reasons why:

1. New buyers and sellers are still coming to the platform

Active buyers increased 38% year-over-year to nearly 96 million, and active sellers increased 103% to 7.5 million at the end of September. The company revealed unique buyers were over 89 million and active sellers were 5.2 million. That means the remaining unique buyers and sellers are on the company’s music equipment marketplace Reverb, as well as on recent marketplace acquisitions Elo7 (the “Etsy of Brazil”) and Depop (used fashion reseller popular among Gen Z).

2. Rising advertising revenue

Advertising was the second biggest driver of growth in Q3, increasing 28% year-over-year. Etsy uses machine learning technology (a type of artificial intelligence) to increase the relevancy of ads to shoppers. This in turn generates better results for sellers wanting to market their products. As this program continues to improve, it will be used across the other platforms, Elo7 and Depop, as well.

3. Increase in repeat customers

Customers that made two purchases in the last 12 months increased 35% to 36 million in Q3. Habitual buyers (by Etsy’s definition, six or more purchases and at least $200-worth of items bought in the last 12 months) increased 65% to nearly eight million.

At the midpoint of fourth quarter revenue guidance, Etsy is expecting 10% year-over-year growth to a range of $660 million to $690 million. Given the massive holiday shopping season the company experienced last year when revenue increased 129%, that’s pretty good progress.

Etsy remains a core holding in Concinnus Financial’s growth stock category after the Q3 2021 earnings report.

Content in this material is for general information only and is not intended to provide specific advice or recommendations for any individual. Our investment philosophy takes a forward-looking approach that may not transpire. The economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. Investing involves risk and you may lose your principal.

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