The last year has been a difficult one for Etsy as it grapples with winning back customers amid a post-covid slump marked by changing consumer spending habits and a weakening economic background. To lure back shoppers, the company is going all-in on advertising.
Etsy’s marketing budget surged during the pandemic, and it has remained higher since. In recent years, the company significantly increased its marketing spending, reaching $710 million in 2022 from $501 million in 2020. The momentum hasn’t slowed down this year, with expenditures continuing to climb. By the end of September 2023, Etsy had already directed $498 million toward marketing, a $32 million increase compared to the same period last year, according to its most recent annual report to the US Securities and Exchange Commission.
The goal is to return to the booming sales Etsy saw during the pandemic, when customers flocked to the platform for Covid-related items, especially masks. In 2020 Etsy saw its marketplace revenue jump with a 119% increase to $1.3 billion from the previous year. This growth slowed down by 2021 when it grew by only 34% as fewer shoppers came to Etsy, instead spending on things like travel and experiences as lockdowns expired. The availability of low-cost products, like those from Chinese companies Temu and Shein, also flooded the marketplace with cheap goods that compete with Etsy’s fare.
A big part of Etsy’s strategy is making sure that consumers know the brand, according to Marvin Fong, an analyst at BTIG LLC.
“When we hear the term ‘brand marketing’, it’s often the last lever a company pulls,” he said. Etsy “relied just on page search and things like that and at a certain point it does pay off.”
The unique offerings that Etsy has available are front and center in its new holiday campaigns. The online handicraft place aired four new TV and billboard commercials in the US and UK on Nov. 1, showing Etsy has the gift you are looking for.
Each advertisement portrays the struggles individuals face while searching for the perfect gift for their loved ones. These videos depict scenarios such as satisfying the preferences of distinct twins, a daughter seeking a gift for her straightforward-living dad, a woman in search of a present for her tall boyfriend, and a jacket inspired by a niece’s art. Throughout, Etsy’s personalized gifts emerge as the solution to these gifting challenges.
But the impact of this strategy is hard to measure in a way that really shows whether these marketing pitches are working with consumers. Fong, the analyst, expressed uncertainty on the Etsy strategy’s effectiveness, but noted that “it doesn’t mean it’s not useful.”
“They were coming home about brand marketing and they realized we are not getting that resonance because it’s just too much noise. The shopper is just not inclined to spend on that sort of thing,” said Fong.
In addition to TV ads, Etsy is preparing for its first-ever Super Bowl ad next year, a strategic step amid widespread staff cuts and restructuring. The company recently laid off 225 employees, about 11% of its workforce, including its Chief Marketing Officer, Ryan Scott, who served in the role for a decade. The company merged the CMO position into operations, appointing Chief Operating Officer Raina Moskowitz as the new chief operating and marketing officer.
The company has also experimented with promotional incentives to regain shoppers, including online discounts.
Etsy’s Chief Executive OfficerJosh Silverman said in the recent promotion campaign that cutting $5 off $25 purchases had “worked very well” and was a revenue driver.
“We are not a blue-light special company that’s going to be about the cheapest, cheapest way to get everything,” Silverman said. “And so having promotions was a way to communicate that there’s value available on Etsy.”
The company also aims to bolster seller services and invest more in marketing, tools, and customer support to attract and retain sellers, facilitating more business opportunities.
“These services, which represent a revenue stream for Etsy, should help to attract and retain sellers, and help sellers to do more business,” Chris Graja, a senior analyst at Argus Research, wrote in a note.
To be sure, some sellers haven’t seen a direct impact from the changes yet. Sarah Lynch, who has sold ceramics, jewelry and art on Etsy for more than a decade, has seen sales decline after the pandemic. The platform’s initial organic traffic and social media boosted Lynch’s sales when she started out, but changes in ad traffic have worked against her business.
“Now, Facebook limits the reach of business pages unless you pay and Etsy has a lot less organic traffic,” said Lynch.
But overall, there are some signs that investors are content with the direction Etsy is going with its marketing.The company said that higher marketing spend helped lift sales in the third quarter, which beat analyst expectations and drove higher than anticipated revenue.
That’s helped Etsy stock claw back some losses – shares have surged more than 20% since its third quarter earnings release, outperforming the S&P 500 Index in that time. Still, its shares are down 74%from the all-time high reached in 2021.
