Etsy’s Down 80%… Can Their $200 Billion Gift Market Gamble Bring Them Back to Their Roots?

At one time Etsy was the go to spot to find quirky handmade gifts and unique crafts made by a grandma somewhere in Wyoming? Well, somewhere along the way they turned into something else entirely—and not in a good way. Etsy’s stock has dropped a brutal 80% since its peak in 2021 and they just let go 11% of their workforce. 

Back in the pandemic's peak, Etsy was thriving. Everyone suddenly became a seller—whether it was face masks, banana bread kits, or homemade candles with names like “Whispers of Lavender and Regret” (yeah, you’ve definitely seen those). People were more than willing to drop $25 on handcrafted soap shaped like a cactus because, well, what else were we doing at the time? But now that we’re allowed out of our homes, folks aren't as interested in splurging on artisanal soap or candles. Instead, they’re back to the big-box stores and, frankly, just trying to save some cash.

Now, Josh Silverman, Etsy’s CEO, has a plan to bring back the charm. He’s quick to point out that Etsy is not Amazon—and that’s kind of the point. Etsy’s strength lies in its personal, handcrafted touch. You’re not going to Amazon for a custom bachelorette tee or a hand-thrown mug, are you? Etsy wants to stay that go-to place for personalized, one-of-a-kind gifts—think the kind of stuff that doesn’t just come off an assembly line.

The problem started back in 2013 when Etsy allowed sellers to outsource parts of their production, opening the door for all kinds of factory-made goods. It helped Etsy grow fast, but it also diluted what made the platform special in the first place. Fast-forward to today, and Etsy is trying to clean house, focusing more on genuine handmade items again. They’re cracking down on mass-produced goods and doubling down on what made them stand out: that artisan touch.

But let’s be real—Etsy isn’t just fighting off Amazon. They’ve also got to deal with the rise of ultra-cheap fast-fashion giants like Shein and Temu. These platforms churn out knockoff everything at prices that make Etsy sellers weep into their hand-dyed yarn. And it shows: Google trends show that Shein’s search popularity has caught up with Etsy, and Temu’s not far behind. And when you can buy a trendy shirt for $4, why would you pay $40 for a unique version that looks suspiciously similar, just with a “handmade” tag slapped on?

To put things in perspective, Amazon raked in $750 billion in sales last year. Etsy? Just $13 billion. They’re not even playing the same game. But Etsy doesn’t want to win on volume—it wants to cater to the shopper who’s willing to pay for a hand-thrown mug or a unique, handcrafted gift, rather than a mass-produced knockoff.

So, what’s Etsy doing to turn things around? Well, for starters, they’re eyeing the $200 billion gifting market with their “gift mode” feature. Now, you can send a message along with that handmade bracelet or personalized wedding sign before it even gets there. And here’s the exciting part: Etsy only owns 1% of the gifting market, so there’s plenty of room to grow.

Another thing: they’re getting more serious about their app. Apparently, only 40% of Etsy users are using the mobile app is kind of surprising. Silverman wants to bump that up to 75%, and if they pull that off, it could be a major upside. Etsy is also rolling out a subscription program called Etsy Insider, giving shoppers perks like free shipping and early access to new drops. Basically, they’re taking a page out of Amazon's playbook.

Etsy’s revenue was up 7% last year, hitting $2.75 billion, but the growth forecast for 2024 is pretty meh. Analysts are saying Etsy’s stock could potentially double in the coming years. Maybe that’s a stretch, but with a little focus on what made it special in the first place, Etsy might just be able to stitch things back together and reclaim its former glory. 

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Stocks.News holds positions in Amazon and Etsy.