In September, S&P Dow Jones indices added Etsy on S&P 500, Removing H&R Block, Inc. (HRB), Coty Inc. (COTY) and Kohl’s Corporation (KSS). Specifically, the addition of Etsy, a Brooklyn-born craft market, preceded the expected addition of Tesla, Inc. (TSLA) due to possible questions about Tesla’s profitability. David Whiston from Morningstar told Fortune This “stability of Tesla’s profits” could be behind S & P’s decision.
Etsy stock price, which reports third-quarter earnings on Oct. 28, has risen sharply from below $ 50 at the start of the year leading up to the COVID-19 outbreak. While 2020 has been brutal for many retailers, Etsy has weathered the pandemic remarkably well as more consumers shop online, spend time at home, and pick up new hobbies.
“We see the pandemic as a benefit for Etsy by increasing digital demand while creating the opportunity to attract new customers who want to buy (COVID-19) masks.” said Needham analyst Rick Patel. “We believe Etsy is making good strides in terms of customer loyalty, which should fuel future growth.”
While many retailers, large and small, have crashed since the rise of Amazon and eBay Inc. (EBAY), Etsy held the course. In fact, 2020 could prove to be the biggest year yet. Etsy’s performance in this pandemic is the result of its strategic positioning over the past 15 years – as well as Amazon’s stumbling blocks. In many ways, at the core of Etsy’s success is its mission to offer “handcrafted and differentiated” merchandise and enable visitors to browse and find these unique products.
Come for the masks, stay for the rest
In the second quarter, Etsy reported mask sales of $ 356 million, which the company described as “enough masks for all the way from New York to London”. The huge demand for face coverings also resulted in non-mask sales, which according to data rose 93% in the same quarter Company data.
“Most first-time customers who go to Etsy to purchase masks end up buying also other productsand many of them will remain on the platform in the future, “said Needham analysts.
Masks aside, Etsy’s top household goods and home furnishings category rose 128% year over year. Craft supplies sales increased 138%, and jewelry and accessories sales also increased 50%. The ability to search, browse, and more recently save for relevant products is part of the appeal of Etsy to buyers and sellers. The company’s gross profit margin is growing – it was 74% in the second quarter, up from 640 Basis points compared to 67.6% in the previous year.
Etsy has done so well over the past few months that the company is rethinking its addressable market. In 2019, Etsy estimated its target market at $ 100 billion based on the assumptions of the top six countries, the separation of online and offline shopping experiences, and product differentiation.
“In fact, COVID helped explode each of these three assumptions. Etsy competes in almost every market in the world, not just the six core markets. In fact, the distinction between online and offline has dissolved (almost) in the past few months,” said Josh Silverman, CEO of Etsy, on the call to win. “When we pull back and look at what we’ve learned over the past three months, it reaffirms my belief that the size of Etsy addressable market starts with a T, not a B. All of this gives us even more conviction about it the size of the pricing that Etsy is changing and the ability to invest to fully realize that growth. ”
Amazon probably will e-commerce advertising spending dominates, according to Insider intelligence Research. The company expects Etsy’s share of ecommerce ad spend to grow nearly 70% to $ 133.2 million.
Amazon launched Handmade in 2015, but so far it hasn’t slowed Etsy growth. With further improvements to Etsy’s machine learning By experimenting with augmented reality features, Etsy is ready to stay competitive in handcrafted categories.
Many small craft sellers on Amazon continue to compete with its “huge database of bulk goods,” according to reporting from A zero earlier this year. “An Amazon Handmade saleswoman said that sometimes she can’t find a store of her own using Amazon’s search function,” the company reported. Amazon is trying to change that and plans to improve its search and discovery capabilities, as reported by Business Insider.
Until then, Etsy will likely continue to benefit from increased online engagement, increased ad spend across all eCommerce platforms, and deeper differentiation of its platform as a go-to place for unique, handcrafted goods.