Etsy’s Digital High Street

The Etsy pitch

Originally a niche provider of handmade crafts, Etsy are slowly building an empire. In opposition to the undesirable traits apparent in the biggest brands — mass production, fast fashion and single use plastic, Etsy are slowly acquiring their way to become a ‘House of Brands’ with strong ethics and shared values that resonate with the next generation of conscious consumers and the ‘trendsetter generation’, Gen Z.

As an investment proposition, strong fundamentals, smart investments and a large addressable market make Etsy very appealing for the future.

Mckinsey | Glassdoor | Modern Retail

What do they do?

Currently an online marketplace for a community of 4M people (and growing) to sell their wares to over 81M users worldwide. They make money from listing fees, transaction fees, promotional ads, subscription fees, and payment processing fees. Their growing number of other independent brands operate under a similar marketplace business model. As they grow, Etsy’s brand are uniquely positioned to serve the next generation of consumer and serve (or buy into) new consumer trends and niches as they emerge.

The three-point investment thesis

  1. Strong fundamentals — revenues and gross merchandise sales up over 100% YoY with consistent growth for the last 10 years. Profit margins are at an impressive 75%, having grown steadily for the last 5 years. The second-hand market, which Etsy has recently made acquisitions in, is set to grow at a CAGR of 39% until 2024.
  2. Smart investments — shortcut the path to new audiences with acquisitions of Depop, Reverb and Elo7. They are also investing into the in-app experience — dedicated to increasing the number of ‘habitual buyers’ (made purchases on 6 or more days and spent $200 or more in the past 12 months — this group is up nearly 160% this year) with smarter search technology and personalised recommendations. These investments and acquisitions mean Etsy’s will have a trove of customer data to rival Amazon by 2030.
  3. Brand positioning — By 2030 Gen Z will be the largest consumer base. The value values of Gen Z read like the guiding principles on Etsy’s website. If they continue to cultivate a good relationship with their community and keep their ethics in check, they are poised to reap significant rewards.

Brand positioning and Creative Strategy

Etsy are popular. Strong leadership, a compelling brand message and emotive marketing campaigns have cemented them in the hearts and minds of conscious consumers and employees alike. They take a grassroots approach to marketing — championing their sellers with beautiful stories that create more personal connections. They also tick all the right boxes for their niche: advertising around holidays and profiling their unique products. This has served them well, especially over the last year.

Strategic Creative recommendation

Etsy’s ‘House of Brands’ could also be described as a ‘Digital High Street’ where trends and niches live. However a mix of smaller brands are more susceptible to competition. What binds these brands is the strong community and their shared values. Etsy need to leverage this and align other consumers sensitive to these values with an aspirational campaign. I’d like to see a campaign that showcases young, expressive, diverse members of the community with the energy of an Adidas advert and an idea as strong as ‘Think Different’. An aspirational profile of the ‘Etsy user’ and their values will be the thread that ties all of its brands together and the reason that people choose Etsy brands over any other in the coming years.

Keep an eye out for…

  1. Q2 earnings at the beginning of August
  2. How they manage their transition to a conglomerate and the senior leadership team
  3. Developments to the Etsy app, to existing brands and new acquisitions

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