2018 Annual Report

The path to owning special

We live in an era of incredible convenience, matched with equally incredible price and selection. Any commodity item can be purchased with one click, packed by a robot, and land at your door virtually the next day. But when the world develops a default, it also craves the antidote.

We believe Etsy is the antidote to commoditized commerce—I often call us the home for special. As massive e-tailers compete to dominate the world of the everyday, many of us shop with them for the commodities of life. They are increasingly commoditizing everything, reducing online shopping to price and speed of delivery. But it is very hard for them to be the place we want to go when we want something to be, or to feel, special.

Test yourself. Think back over the last year, and to all of the moments that mattered to you. You may think of the wedding of a loved one, a celebration or birthday, or furnishing a new home. With over 60 million items, chances are Etsy sellers have the perfect thing for those perfect moments in your life, moments when you want to show you care or express your own individual style. Etsy also makes the smaller moments in life special. A family connects in a kitchen over flour, butter, and salt— and a rolling pin from Etsy, embossed with hearts, that literally presses images of love into every cookie and crust. This is how Etsy elevates the everyday.

With so many moments in life deserving a human touch, we believe the market for “special” is enormous. In our top six geographies alone, online shopping spend in relevant categories is nearly $250 billion annually. And even after our strong growth in 2018, we are still very small compared to this market opportunity, with 2018 Gross Merchandise Sales (GMS) of $3.9 billion representing less than 2% market share.

And we’re just getting started. Two-sided marketplaces are lightning in a bottle—only a few have been able to scale. They are incredibly hard to build, but once scaled, like Etsy, they are incredibly resilient, and get better as they get bigger. Etsy has two-sided vibrancy: buyers come because of our sellers, and sellers come because of our buyers. And in 2018 we grew our active seller count by over 9% to 2.1 million and active buyer count by over 18% to 39.4 million.

2018 Integrated Report

While we are still in the early innings of realizing the opportunity for “owning special,” I am very proud of the progress our team made in 2018. We brought renewed focus to the business, made significant investments in product development, marketing, and technology and drove operational excellence and strong financial performance. GMS rose 21%, revenue climbed 37%, and we significantly improved our margins. It’s important to note we’ve done this while becoming more efficient. Etsy teams are clear on their mission and on what success looks like and we’ve nearly doubled revenue per employee over the past two years.

We still have exciting work ahead to deliver the delightful product experience that will bring to life the true promise of Etsy. Etsy has four areas of sustainable competitive advantage, our “Right to Win,” where we are good today or plan to be great in the future. We are confident that the combination of these factors gives us the right to be a very big business, with many years of growth ahead of us.

• We start from a foundation of over 60 million listings. We believe no one else comes close in breadth and depth of unique offerings, which include handmade and vintage products from all over the world.
• To make sense of this vast sea of listings, we must solve the tyranny of choice. A track of work on best-in-class search and discovery will surface high-quality items that feel curated to the individual shopper.
• Now that we’ve shown you something that speaks to you, what happens next is the real magic: unlocking the power of human connection. Unlike other shopping destinations, there’s a person behind every item, waiting to answer your questions and personalize or customize that item just for you. This is where Etsy already stands out and we plan to continue improving as we lean into making these human connections an even bigger focal point of our marketplace.
• Finally, the collective of Etsy’s 2.1 million active sellers needs to feel to the shopper like a cohesive brand you can trust. We are excited for the work ahead, building a strong brand promise embedded with trust signals and best-in-class support.

Over the past two years, we’ve raised the bar not only around delivering great business results, but also around having a positive impact on both people and the planet. Our business and social impact are fully aligned. Economic empowerment is our day job: by bringing more buyers to Etsy, we have put more money in our sellers’ pockets and helped them achieve their personal and financial goals. We are proud of our progress on gender diversity: we have achieved gender parity at the leadership level, including our executive team and Board of Directors. We have also made great progress in mitigating our ecological impact, having recently become the first global ecommerce company to offset 100% of carbon emissions generated by shipping. And we did it at a cost to us of less than a penny a package. By holding ourselves accountable to measurable impact goals, great intentions can translate to great outcomes.

We have demonstrated our ability to drive operational excellence and financial performance while raising the bar for corporate citizenship. I am extremely proud of our team’s work positioning Etsy for sustainable growth by building a world-class buying and selling experience. We’re excited about the foundations that we’ve laid because we believe they pave the way for the next chapter of Etsy’s story.

Onward,
Josh Silverman
Chief Executive Officer, Etsy