Etsy makes all the right choices


One thing the COVID-19 pandemic has done is help clarify which companies can easily adapt to new customer behavior and which are falling flat in this area.

Etsy (NASDAQ: ETSY), the online creative products marketplace, has had a daily niche audience of DIY enthusiasts to support its brand, but new leadership has improved the platform to keep pace with tastes and demands. client.

Here’s why these facts and others suggest that Etsy should be seriously considered an investment.

Image source: Getty Images.

The pandemic puts the Etsy model to the test

In the company’s first-quarter earnings reminder in May, CEO Josh Silverman detailed Etsy’s opportunistic efforts to mass-produce masks as the coronavirus pandemic rapidly spread across the United States.

First, the company had to recognize that there was a rapidly growing demand for products. Then he realized that the standard search for masks on his site returned results related to vacation masks. So within hours, he had to rewrite the search engine algorithms to generate the results that potential buyers actually wanted. Then you had to make sure there were enough masks to keep up with demand, but Etsy isn’t actually making anything, so it had to tap into its seller base to scale up and make them. . Then he had to distribute the overwhelming demand among the sellers so that the supply could meet it. Finally, vendor delivery times needed to be determined so that customers knew what to expect and when to expect it.

Silverman said the supply and demand matter affected all of Etsy’s teams and had “all hands on deck.” In April, 12 million face masks were sold on the site. 22% of purchases were from new buyers and 2.5 million were buyers who had not visited during the year. There are currently 60,000 sellers of face masks on the platform.

“The reason I wanted to tell this story is because I think it really highlights the dynamism of the Etsy model and our Etsy sellers and how they are able to change so quickly to meet new demands,” a- he declared. I couldn’t agree more.

Etsy adds sophisticated tools

Etsy recently brought augmented reality to its market so people can see how a piece of wall art fits their space. With this type of technology, Etsy exits the “creative” space and smoothly slips into the “artistic” space, to appeal to high-end customers who can get personalized and exclusive items. According to the company, 88% of shoppers said Etsy offers products not available elsewhere, which projects a different image than a hobbyist DIY store. This opens up the business to a whole new consumer without alienating its primary customers, who can still get their creative products.

This is just the latest version of the company’s evolution towards an improved customer experience. As the seller base grew to 2.8 million active sellers, it became difficult to sift through the thousands of results generated for a search term. With the overhaul of the marketplace, Etsy introduced a more sophisticated search system that more accurately identifies what a customer is looking for, resulting in much better results. Not only does this increase the chances of a purchase, but it makes life easier for customers, who feel better about coming back.

These new tools paid off during the pandemic, when retail options were limited. Etsy’s sales have skyrocketed, with sales of non-masked products up 79% for the month of April. And especially around this time, Etsy gave affected customers a way to support small businesses, which are the meat and potatoes of its market.

Team up with well-known names and celebrities

Etsy has forged strategic partnerships with celebrities and designers to promote itself as a mainstream market.

In April, he released a home collection designed by Madison Avenue owner Joseph Altuzarra and produced by eight select Etsy manufacturers. It’s the perfect marriage of high-end design and small business. It plays on the distinctive advantage that Etsy’s marketplace can offer in innovative ways, leading to new market segments that match the strengths and profile of the company.

In the wake of this launch, Etsy announced that Drew Barrymore will join the company as a famous judge for its second annual design award. It’s another way to standardize the unique business model and connect with customers who are new to Etsy.

The bottom line

How big can a niche business grow? Very, if it focuses its energies on improving the customer experience, whether it is vertical growth by adding capabilities or horizontal growth such as the acquisition of Reverb, a market of ‘musical instruments.

Etsy didn’t look so strong when it went public in April 2015, but it made significant changes to both the management and the model over the next five years, which l he is well positioned to deal with the pandemic, which he has been successful in doing. . It continues to leverage its digital platform to acquire customers during the transition to e-commerce and probably see more growth because it responds to customer demands.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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