Etsy is struggling. The Brooklyn-based online marketplace for all things artisinal posted its third-quarter earnings report today—and the results aren’t pretty.
The company brought in $65.7 million in revenue, a 38 percent increase year-over-year, which sounds good. But that figure fell short of analyst estimates, which predicted sales of $66.4 million, according to data compiled by Bloomberg. Etsy also reported a net loss of $6.89 million, or 6 cents per share, during the quarter. In after hours trading, shares dropped nearly 10 percent, hitting an all-time low. The company's stock price dipped as low as $10.15 per share, which means it has lost close to two-thirds of its value since Etsy's rather successful IPO in April.
During a call with investors, CEO Chad Dickerson reiterated the company’s goals, which included, among other things, “making Etsy an everyday experience.” To do just that, Etsy has been working hard to keep its platform top-of-mind for shoppers on the lookout for handmade and vintage goods. The company has spent liberally on email, mobile, and search advertising—spending on marketing initiatives rose 88 percent year over year, according to the company. And its efforts have worked, in some ways: this quarter, the company says the number of active buyers on the site increased 25 percent from 18.1 million to 22.6 million. Etsy also saw a 20 percent increase in active sellers, who rose from 1.3 million to 1.5 million.
But Etsy needs to do more, especially as it faces a looming threat from the world’s largest retailer. Amazon recently launched an artisanal marketplace of its own, Handmade. To fend off the competition, Etsy has embraced mass manufacturing to help its sellers crank goods out in volume.* And last month the company rolled out same-day delivery through Postmates in parts of New York City.
But Etsy’s artisanal nature means it’s hard for the company to truly turn itself into an “everyday experience,” unlike Amazon, where dipping into the online marketplace for truly everyday items like toilet paper is a common occurrence. Etsy is trying its best to be like Amazon by copying many of its larger rival's methods. But without its own massive logistics infrastructure, Etsy has to resort to its own ways of innovating—a strategy that so far, at least, has not seemed to help the company make artisanal go mainstream.
*Update, November 4, 9:30 pm ET: Etsy disputes this characterization of its position toward manufactured goods, pointing to CEO Chad Dickerson's claim on yesterday's earnings call that Etsy is "reimagining manufacturing and its more human, its smaller scale."
