Sales on grow nearly 24% in 2015

February 25, 2016 03:11 PM

“Mobile is the heart” of key growth initiatives at Etsy Inc., executives say, and it paid off in 2015.

Improvements to Etsy’s mobile apps and site spurred a 23.8% jump in year-over-year sales on Etsy’s marketplace, executives said on an earnings call this week with investors to discuss fourth quarter and full-year 2015 results. Sales on the marketplace, which the company refers to as gross merchandise sales, increased to $2.39 billion from $1.93 billion in 2015, the company reported. In the fourth quarter that ended Dec. 31, gross merchandise sales were $741.5 million, up 21.3% from $611.5 million in 2014.

Mobile shoppers accounted for 43% percent of 2015 purchases on the marketplace for handcrafted goods and 60% of traffic—both figures up 6 percentage points from 2014.

In 2015, Etsy updated search functionality that allows consumers to browse by category, feature or product type. Within Etsy’s app, the company added a social sign-up and sign-in via Facebook and Google. Additionally, Etsy expanded its payment options in 2015 to include Apple Pay, Google Wallet and PayPal.

Chad Dickerson, chairman and chief executive officer of Etsy, said these improvements on mobile led to a 4.5-star rating in the Apple app store, up from about 2.5 stars in 2014. The app has 31.8 million downloads as of Dec. 31 compared with the 25 million downloads on March 31.

“We believe this foundational work improved the experience across the buyer journey and contributed directly to our apps GMS growth, which grew well over 50% in 2015,” Dickerson said.

Revenue, which Etsy generates from listing fees, seller services and commission on sales, jumped 39.8% to $273.5 million from $195.6 million in 2014. Etsy is generating more growth from services to sellers, such as promoted listings in search results, credit card processing and by providing shipping labels. Revenue from seller services grew 65.6% in 2015 to $136.6 million from $82.5 million a year earlier. Seller services revenue represents 49.9% of total revenue in 2015, compared with 42% in 2014. The rest of the revenue, which Etsy calls marketplace revenue, increased 22.0% to $132.6 million in 2015 from $108.7 million a year ago. Marketplace revenue comes from the 20-cent listing fee Etsy charges and the 3.5% commission it takes on every sale.

“In our view, management’s ability to drive seller services revenue will be one of the keys to the stock’s long-term success, as it will enable the company to generate much higher revenue from its platform vs. only its marketplace effort,” Tom Forte, senior vice president and senior analyst at Brean Capital, wrote in a note to investors.

On the earnings call Dickerson announced plans to launch new seller services in 2016, though he did not provide specifics. He did say more than 50% of Etsy’s sellers also sell on other online platforms, including their own e-commerce sites.

“We believe we can develop tools and services to help our sellers better manage these multiple sales channels,” Dickerson said on the call, according to a transcript from Seeking Alpha. “Over time this presents a significant opportunity for Etsy to enhance the value of our platform for our sellers and to expand our addressable market opportunity.”

Forte notes that seller services are key to Etsy growing its business.

“At its core, Etsy is about enabling consumers to purchase hand-crafted merchandise made by its sellers. In order to scale the business, Etsy will need to not only add more buyers and sellers, but enable its most successful sellers to produce more merchandise while maintaining its high-quality, thoughtfully produced, not mass-produced appeal,” Forte said.

Etsy has made moves to address this with wholesale and manufacturing programs that help sellers work with small manufacturers to create merchandise. “At the end of 2Q15, Etsy has approved 4,700 sellers and 7,900 manufacturers in the program, with 85% of those partnerships for sellers and manufacturers in the same country,” Forte said. “In 3Q15, it built upon that effort with the launching of the Etsy Manufacturing Marketplace and to-date it has signed up 600 manufacturers (of various sizes) to that initiative.”

For the fourth quarter ended Dec. 31, Etsy reports:

  • Gross merchandise sales of $741.49 million, up 21.3% from $611.47 million in 2014.
  • Revenue of $87.9 million, up 35.4% from $64.9 million in the same period in 2014.
  • Marketplace revenue of $39.8 million, up 19.5% from $33.3 million a year ago.
  • Seller services revenue of $47.2 million, up 53.7% from $30.7 million a year earlier.
  • Active sellers increased 15.5% to 1.563 million from 1.353 million.
  • Active buyers increased 21.4% to 24.046 million from 19.810 million.
  • EBITDA (earnings before interest, taxes, depreciation and amortization) of $14.049 million, a 51.1% increase from $9.298 million a year ago.
  • Net loss of $4.2 million, less than the $5.4 million net loss in 2014.

For full-year 2015, Etsy reports:

  • Gross merchandise sales of $2.388 billion, up 23.7% from $1.931 billion.
  • Revenue of $273.5 million, up 39.8% from $195.6 million in 2014.
  • Marketplace revenue of $132.6 million, up 22.0% from $108.7 million a year ago.
  • Seller services revenue of $136.6 million, up 65.6% from $82.5 million a year earlier.
  • EBITDA (earnings before interest, taxes, depreciation and amortization) of $31.007 million, a 34.3% increase from $23.081 million a year ago.
  • Net loss of $54.1 million, more than double the net loss of $15.2 million in 2014. 



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