Etsy's First Quarter Financial Results: Key Indicators Under Scrutiny
Etsy, the leading marketplace for special goods, is gearing up to report its first-quarter 2022 financial results on May 4. Despite a recent increase in seller fees, the platform has managed to maintain its position as the top destination for unique items, thanks to its continued growth in user base, spending per active buyer, and a healthy take rate.
In the last reported period, the fourth quarter of 2021, Etsy added 17.6% more active buyers year over year, reaching 96.3 million, and saw a 72.3% increase in active sellers to 7.5 million. The surge of mask sales during the pandemic was a temporary boost, and the business is now expected to resume its reliance on non-mask revenue.
The introduction of a higher seller fee is anticipated to raise Etsy's take rate going forward. In April 2022, the fee was increased from 5% to 6.5%. Historically, Etsy's take rate, the percentage it retains from the Gross Merchandise Sales (GMS) as revenue, has generally been stable or slightly increasing due to platform improvements and fee adjustments. In 2021, Etsy's take rate for the Etsy marketplace was 18%, while its overall take rate, including subsidiaries, was 17.1%.
As for user growth, Etsy usually projects moderate active buyer growth reflecting ongoing expansion but at a slowing pace due to market maturation. The platform's brand recognition continues to rise, potentially allowing it to steal business from other retailers, particularly for special occasions. With more of the population getting vaccinated and consumers shifting spending from products to experiences, the tailwind that benefited Etsy since the spring of 2020 is slowly starting to fade.
However, Etsy's long-term trends, such as consumers' heightened interest in supporting small businesses and the popularity of entrepreneurial pursuits, provide a boost for continued growth. Etsy sells a broad array of merchandise, ranging from home furnishings and jewelry to clothing and beauty products.
In terms of GMS per active buyer, this metric typically shows a slight increase year-over-year as Etsy focuses on higher-value purchases and improving buyer engagement. For the first-quarter 2022, Etsy's GMS forecast is $3.2 billion to $3.4 billion, implying 5% growth at the midpoint over the prior-year period.
Etsy remains the top marketplace for special goods despite the slowing tailwind and increased seller fees. As the platform continues to adapt and evolve, it will be interesting to see how these changes impact its financial performance in the coming quarters.
- As Etsy prepares to reveal its first-quarter 2022 financial results, investors will be keen to see the impact of the increased seller fees on the platform's take rate.
- Etsy's continued growth in user base and spending per active buyer, coupled with the increased seller fees, may indicate a strategic shift in focus towards higher-value transactions and improved buyer engagement.
- With the slowing tailwind and increased seller fees, the financial performance of Etsy in the coming quarters will be closely watched by investors, as it navigates the changing retail landscape and seeks to maintain its position as the leading marketplace for special goods.
