Etsy Inc. (NASDAQ:ETSY) Canaccord’s eCommerce Sustainable Advantage Virtual Forum 2022 March 24, 2022 12:00 PM ET
Company Participants
Rachel Glaser – CFO
Conference Call Participants
Maria Ripps – Canaccord
Maria Ripps
All right. Good afternoon, everyone, and welcome to our keynote session. For those of you who are just tuning in, I’m Maria Ripps, internet analyst here at Canaccord. And I couldn’t be more excited to introduce Rachel Glaser, Etsy’s CFO. Rachel has had a long career as CFO of several leading Internet companies and joined Etsy in 2017 when the stock was below $20.
And she has been instrumental in the company’s success over the past 5 years. Rachel, it’s really great to see you. Thank you so much for joining us again this year for our e-commerce firm.
Rachel Glaser
Thank you so much for having me. It’s a real pleasure to be here.
Question-and-Answer Session
Q – Maria Ripps
Great. So it has been an eventful 2 years for the business with COVID altering consumer behavior and accelerating e-commerce adoption, what are some of the most important lessons the management team has learned about Etsy’s buyers and sellers since the pandemic started?
Rachel Glaser
Etsy really hasn’t changed its strategy at all throughout this entire time. Early on when Josh and I first started, Josh coined the term we want to own special. And we still believe that we have our 4 rights to win, which involve being a trusted brand, having really strong human connection, really world-class search capabilities and this enormous foundation of very unique merchandise from all over the world. And those things have been maintained and have become very much core to what has caused significant increases in sales during the pandemic.
One of the things I’d say we’ve learned is that, we’ve talked about previously, what part of the market Etsy can own versus what part isn’t to offline versus online, for instance. And if anything, during the pandemic, we saw those lines sort of evaporate, that people don’t wake up in the morning to think I want to buy something handmade from an online shop. They wake up thinking about I have an event to attend or I have a gift that I need to give somebody, and where is the place that I can find the most special unique item. And that is what Etsy has become known for even more so during the pandemic.
Maria Ripps
And Rachel, you recently talked about sort of how Etsy sort of gained share within e-commerce during COVID. How sustainable do you think these gains are? And what do you think are the biggest sort of drivers behind this momentum?
Rachel Glaser
We really — we think Etsy stands for something really different, that’s keeping commerce human. That’s in our mission throughout this entire time. And one of the metrics that we point out a lot is the number of people that come back to Etsy and spend more and more. So we’ve talked about this category of buyers that we call habituals. So about [90%] of our total active buyers are buyers that come 6 or more times a year and spend $200 or more. And they represent 45% of our total GMS, and they’ve grown every single quarter over the past many years. In addition, our trailing 12-month GMS per active buyer was up again in the last quarter, up 16%. And what that shows us is that people really — Etsy really does stand for something different that you pretty much can find anything on Etsy, although we’re not big in electronics, although you can find those items too on Etsy. We don’t sell houses or cars. But for the most part, you can find everything, but it’s going to be something that is — that you’re going to take a minute to think about it and will be slightly more special.
So for example, if we want to do a baking project with a family member, you can buy a rolling pin anywhere at a target or a Walmart or whatever — it’s going to be the Etsy where you’d find the rolling pin that has the imprint of the occasion that you’re celebrating, whether that’s your dog’s birthday or spring or 4th of July or whatever, and you have to come — it’s really only Etsy where you can find those unique and special items. And so we’ve really kind of built up that moat of differentiated items that really have the human connection where you can make that personalized or customized purchase, where you can’t anywhere else on the Internet.
Maria Ripps
Great. You touched on a lot of good points. And we’re going to talk about some of them later in the discussion. But so earlier this week, the company announced the expansion of its executive team. Can you maybe talk about what was behind the decision? And should investors interpret this as, perhaps, Etsy placing more focus now on payments and fulfillment, which are sort of 2 key functions that your new CEO will lead?
Rachel Glaser
So there’s a few — great question. There was a few elements to the expansion to the executive team. First of all, we love our marketplace model. So let me be clear about that at the outset. We love the fact that we are capital light.
We don’t have big distribution and fulfillment centers. We don’t have retail stores. And so therefore, our large percent — our cost base is highly variable with revenue into GMS. And so we don’t have big capital investments to make, that weigh us down. So we’ve talked about long-term margins of 30% or higher, and we’ve hit that number multiple times in the past couple of years.
So nothing that we’ve done with the executive team should signal that we’re stepping away from that Marketplace model that we love. So that’s the first point I’ll make.
Second point is that Etsy’s never had or hasn’t had a CHRO since about 2017. And that’s the Chief Human Relations Officer. And so this change puts that rolled right up at the — what we call our executive team level, our ET level reporting into Josh. And it was an example of when opportunity met need. We’ve happen to find a really great person that Josh had worked with before at American Express, and she became available.
And we had long been thinking with such important initiatives going on right now with DEI and ESG, and what we call how and where we work, the future of work. For Etsy, these are topics that really need to be in the C-suite properly. And so that was the addition of Kim Seymour to our executive team. Raina Moskowitz, who was named COO, previously had the people function tucked into her remit. So with that coming out, it gave her capacity to focus on what she’s calling marketplace services.
And these are services that have an operational and product component to them. So the first one, she had always had responsibility for, member support and trust and safety, extraordinarily important to Etsy. But she assumes responsibility for payments and fulfillment. Both of those have revenue components that roughly translates into Etsy Payments product and Etsy shipping product. And those are things we think we can really scale across our house of brands one day.
So right now, her focus and aim is on etsy.com marketplace. But you could see that those marketplace services have the opportunity to become more platformatized if you will. So that’s what we’re excited about in making those things more robust and profitable for the company.
Maria Ripps
Got it. That’s very helpful. I want to ask you about product differentiation. So Etsy is differentiated by focusing on special items, but at the same time, selection is vast at nearly 100 million products available on your core marketplace. So how do you balance sort of keeping things special with expanding selection?
Rachel Glaser
It’s great point. So 100 million items, and we do a lot of things to be able to find the good stuff fast, and I think we’ll probably talk about some of the search initiatives later. But one of the things that we learned pretty importantly during the pandemic is how agile, not only Etsy’s sellers are, but how agile Etsy is. So when the risk demand for Facebook — sorry, for face mask coming out of nowhere, all of a sudden, our sellers rose to the challenge, and we’re suddenly able to sell face masks. And you see that kind of example happening again and again, where this instantaneous delivery of supply meets demand.
For instance, Bernie Sanders showing up at the inauguration in 2020 wearing mittens, all of a sudden, Bernie Sanders mittens became super popular across Etsy’s website. So the idea that we can instantaneously create no matter what the demand is and the supply will meet it is one of the ways that differentiates Etsy and also promises to make — maintain Etsy’s sort of moat for specialness. The other comment I’ll say here is that we’ve said about 1/3 of Etsy’s merchandise is personalizable or customizable. And just to be clear, we use personalization in a few different ways when we talk about that. One way we use it is personalized search results.
So knowing what you mean, not what you type into a search query, but also knowing what is most likely to get you to convert rather than what you type into the search query. So using a lot of the AI and machine learning that we’ve developed to intuit or infer what you mean is how we personalize a search results for you and also the entire experience that you’ll see on the site. But we also use personalized in the way that your name can be imprinted on a gold necklace that you’re customized in a way that your — the conference — the best table that you have in your home office, if you wanted in maple rather than walnut as you see pictured or you want it round instead of square, you can find lots and lots of sellers that can customize that item for you. And we’re doing it at scale. So there’s places where you can get it hand made.
That’s for sure, but at scale from sellers all over the world to buyers all over the world. There’s not really another site that I can think of that has that kind of personalized and customized experience at that scale. And so I think that’s one of the advantages and one of the differentiators that Etsy has and will always have.
Maria Ripps
That’s great. So Amazon Handmade launched in 2015, but they haven’t really been a competitive threat to you and sort of most other e-commerce platforms largely focus more commoditized items. And I feel like you kind of just addressed it with your answer, but why do you think you have not been able — they have not been able to build a sizable business in specialty goods and sort of what differentiates you and what gives you that advantage over some other players?
Rachel Glaser
Yes. So I mean, not to repeat myself, but I mean I think we’ve created a brand differentiator that is permanent and it creates a significant moat, because we have so much supply and demand that are looking for that specific thing, Etsy competes on special. And I think Amazon and other large e-commerce players compete on price and convenience. And so we own our individual spaces. But if you want to take it from the business or commercial side of it, it’s pretty easy for a seller to have an idea and start a successful business on Etsy, all they need is $0.20 to make the listing.
Of course, the take rate is actually much higher than that when you add in the transaction fee and payments and other things, but most of those other fees are either optional or they’re success-based, meaning you don’t pay the transaction fee unless you actually make a sale. And overall, my MR or take rate is just lower than any of the other marketplace players out there. So it’s pretty — a pretty good proposition for a seller. We give them all sorts of tools and guidance along the way to be able to start a business, I think, more so and done better for sellers and other e-commerce players. Then there’s the option of other sites that create tools and services, so a seller can go it alone, that the #1 thing we give sellers are buyers.
So we have hundreds of millions of visits to Etsy every single month. And we have 90 million customers, people that are coming to Etsy to buy things specifically. And it’s pretty hard to set up your — as Josh likes to say, set up your lemonade stand in the desert because there’s no — nobody knows of mom-and-pop-shop.com. They know of Etsy though. And so we take a lot of the incremental revenue we get from the fees we charge and put it back into marketing and driving sales to customers, and we also have the top of mind awareness of Etsy’s brand that drives sales to customers.
And so we know that starting on Etsy is much more of a going — a profitable proposition for sellers if they want to get the business going.
Maria Ripps
Got it. That makes sense. And I do want to talk about take rate, maybe a little bit later in our discussion. But what are some of the sort of product categories that have performed best recently? And what are some of the categories where that you maybe see as untapped opportunities?
Rachel Glaser
Yes. So we — for many quarters, we’ve listed out our top 6 categories, Home & Living and jewelry were our top 2 categories throughout 2021 and apparel was third in size. Home & Living is sort of flattening a bit, but we’re seeing things like weddings, which is sort of a horizontal category because it touches many categories, start to pop again. We’re in many categories. There’s 50 retail categories.
I get excited about things like the pet category, where I see relative to others, we’re pretty under underachieving there when we have many, many — and it’s a little bit of an evergreen through recession, through inflation, through wars, through whatever people still want to buy things for their pets. We don’t — we’re not big in pet food, although, of course, we do sell pet food and pet treats as well. But all of the toys and Halloween pet costumes and leashes and collars, and dog bowls and all those things are on Etsy. So that’s just an example of a category I think we could dig deeper into. So lots and lots of opportunities.
When we did our house of brand strategy, what you see us doing there is further penetrating categories that we’re in. So for instance, Depop is in the fashion and apparel and accessory category. So that helps us further penetrate that category and extend into the recirculation e-commerce, very fast-growing piece of the apparel category. And then things like Reverb, which adds a category. So that’s really the Etsy of musical instruments.
I’m sure if you type harmonica on to Etsy, you’d probably find some, but you’re not going to find the high-end, super special guitars and ancillary equipment related to guitars and performing that you will on Reverb. So you’ve seen us do both in terms of tackling more of that $2 trillion TAM.
Maria Ripps
Got it. Yes. We certainly saw sort of growth in number of pets adopted during the pandemic and spending this is like accelerating. So it’s an interesting sort of vertical to be in. Rachel, you talk about sort of how habitual buyers still remains the fastest-growing cohort and buyers in the platform.
What are sort of some key characteristics of this group? And how can you sort of take learnings from this group and apply that to a broader base of your consumers?
Rachel Glaser
A great question. So we first identified this cohort back in 2019. And just to define it, it’s buyers that spend more than $200 a year on Etsy and come 6, 4 more times a year. I still think that’s low. We did a little experiment with our executive team recently and looked up each of our spending patterns to see how much we were spending.
And just as an example, in Josh’s household, he had 600 purchases in the last year. So it’s easy to see that you could easily be spending — find things that you need for yourself, your home, your gifting or whatever, at least once a month, 6x a year is kind of a low bar. And that category, as I mentioned earlier, represents 45% of our GMS, it’s about 9% of our total active buyers or about 8 million buyers. So it’s a huge opportunity if we could just find 1 million more of them or you can get that group to spend to increase from 6x a year to 12x a year. I don’t think there’s any one thing about habituals that makes some — that we’ve been able to lock on to that sets their habit.
But here’s a couple of things we’ve observed and that are theories. One thing is that the habituals themselves, their repeat purchase across multiple categories is significantly higher like 10x that of a repeat buyer or a peak buyer is somebody that comes 2 or more times a year. So their propensity to spend across multiple categories is much higher or the inverse, they become habitual because they’re maybe shopping horizontally, like I talked about before, with a wedding, so that they have multiple things to buy in one concentrated period of time. We also know that habitual buyers kind of know how to hack Etsy. So search has gotten better and better and better.
So it’s not so necessary to know these hacks, but I know early on that if I really wanted to find, if I’m looking for gold earrings, for instance, I can be very specific in my search, modern, minimalist, gold, 14-carat gold hoop earrings, and I’m going to get much better to the results that I want. And the habitual buyers know how to like find the good stuff like that, like what words to put into that string of keywords to get there. So our job is to make sure that the hack is automated for people and that we are on — and that’s what we’re doing with our — a lot of our investment in Etsy Walk and knowledge base and other things is we’re automating that so that you don’t have to have a special trick, that we’re going to make it much easier to find the good stuff by inferring what you mean and putting it right in front of you.
Maria Ripps
Got it. Yes, I think Josh did say that his household gets at least one package per week from Etsy. I think that’s what he said. It’s pretty impressive. I wanted to ask about brand and marketing.
So you increased your brand advertising over the past few years, including the introduction of TV campaign several years ago. How has this benefited brand awareness? And how do you expect sort of your marketing mix to evolve over time?
Rachel Glaser
Great question. First, let me just talk about brand. We differentiate it from what we call internally above-the-line marketing or ATL. So part of the brand investment is spending on television or other forms of media or digital video and mid-funnel things that we can do through social channels. But part of brand comes from influencer marketing, it comes from the share of voice and the PR that we get that are economically much less expensive than that ATL spend.
So we’re doing — and we use a full funnel marketing approach, so — and they all work really well together. So we’re doing the full funnel. We’ve definitely increased our spend in above-the-line marketing on a lot of it on linear cable in the U.S., and we’ve also started to make that same investment in Germany and the U.K., less on linear and more on things like digital video and OTT. We get comfortable making that spend. There is definitely a brand element to it.
So after almost every month, we do a market — we do market research to ask buyers and nonbuyers alike to say how — where are you of the Etsy brand, so top of mind awareness in an aided and unaided awareness and measure their intent to purchase. And we’ve seen significant progress in all of those metrics, the more that we’ve invested in that brand awareness.
It’s a lot of the data we had before deciding to make this investment where that people love Etsy, and they were oddly much more likely to advocate for Etsy than they were — than their intent to purchase with showing. I mean, they love Etsy. And when you say, well, then why aren’t you shopping there? Their answer was, what do you mean? I love it.
I shop on Etsy and you can show them, no, you’ve only been once a year or you haven’t been in over a year and they’re always surprised that they realized that they had lapsed. The brand was representing more than their shopping behavior was. So a lot of the brand campaign is to remind people why Etsy and when Etsy. Purchase intent has grown over 100% and visit intent has nearly doubled. And we — so we — we spend this money and we measure it through those — the market research data that I call qualitative, which is sort of after the fact.
And we also measure it with hard quantitative data, like pre and post the ad running what was the lift in direct traffic that we got. And we’ve gotten pretty comfortable that these are high ROI investments. And when we see that we are getting the ROI as the threshold that we require, we’ll keep spending and leading into it.
Maria Ripps
Got it. And can you maybe discuss how brand awareness has evolved in your key international markets?
Rachel Glaser
Yes, we’re seeing great movement in those brand metrics that I mentioned before. In the U.K., unprompted awareness is up 10 percentage points year-over-year. And in Germany, that same metric has more than doubled. So getting really good traction there.
Maria Ripps
Got it. So let’s talk about search and data for a few minutes. Search and discovery has been such an important part of keeping sort of customers engaged in driving conversion. Can you maybe talk about some of the key investments you’ve made in this area over the recent years? And how sort of — what’s driving those results?
And maybe also talk about export, you sort of mentioned it in answering one of the prior questions, but can you just sort of help us understand how that’s sort of helping you to close the cemented gap and improve conversion?
Rachel Glaser
Yes. I still think it’s very early innings in search, and we’ve said for a couple of years now that this is one of the biggest friction points in improving frequency for Etsy because when you come to Etsy, you have over 100 million items, it’s a blessing and a curse. And some people, they love that treasure hunt, the feeling you get when you go to a craft fair or a free market or something and you just don’t know what they’re going to find and you may pull out some treasure that has significant beauty or value to you and you just meander through it. Other people think it’s a huge challenge. I just need just a mother’s day present for my mom, I don’t have hours to do this.
I don’t have multiple sessions to come back and restart my mission. So it’s our job really to make that much more — to make discovery and browse much easier and much more satisfying when you come to Etsy and to make it really feel like it’s made for you so that the results you get when you’re searching for throw pillows might be entirely different than the result that I get when I’m searching for throw pillows. So we’ve talked about this concept of Etsy Walk. And Etsy Walk is really the leveraging of our machine learning and AI capabilities. So we’re utilizing now over 4 billion data points, which is about a 50% increase from when we launched in the second quarter of last year.
And this means that we’re using 16x more real data that captures the semantic meaning across our inventory than we were with our prior search capabilities. So that means we’re taking all this data that we’re getting from you, what things have you looked at before or possibly saved or possibly purchased, what do we know about your demographic, geographic information.
And we’re matching that to what we know about the item, what we know about the seller, and we’re putting those together to put the best results for you so that you have on your first page of search results, lots of choices that you’re very likely to click on. And just to give an example of how we’re faring there is that on the first page of search, we’re up 10 percentage points from — sorry, 95% of our search purchases came from items on that first page of search, which is up 10 percentage points from the beginning of last year, meaning it should take you very few clicks from your query to your click to look at the detailed page for that item to a purchase. And we’re shortening distance from that query to that purchase.
So lots more work to do, but both on the app and on the web, it should feel like the items that are being served are things that are very meaningful and attractive to you. Another example is when you land on Etsy’s homepage, we were basically landing you on a very generic homepage, not knowing who you are when you’re first coming in, you might be getting to serve something that you just most recently bought or something that the editor has picked as the most — the item of the moment. And so we’re trying to customize that landing experience as well to get you to really engage with the content as we come in. So lots more progress to be made, but we’re heading in the right direction.
Maria Ripps
Great. So switching to international. International markets continue to grow in importance, I think, with over 40% of GMS last year, involving either buyer or seller outside of the U.S. How do you feel about sort of the balance between supply and demand in different markets? And how does sort of buyer or seller behavior differ from the U.S. in these markets?
Rachel Glaser
Yes. So we’ve talked about this concept of two-sided vibrancy, so just pausing on that idea for a minute. On the very first day, you decide you want to be a marketplace that a buyer shows up and if there are no sellers, that buyer goes away. Conversely, the very first day, a seller shows up, if there’s no buyer, that seller goes away. So building a two-sided marketplace is hard to do.
And there aren’t that many successful ones. And when you think about each individual market, getting each individual market that have sort of an equal amount of demand as they do supply is what we mean when we say getting to this two-sided vibrancy, A lot of goodness happens at that point, it becomes almost a very nice virtuous flywheel because you can start to serve local search results because there are good local search results to the local, to the domestic demand. And the conversion rate goes up when you see the item you want is in your neighborhood or at least in your country. So in both Germany and the U.K., we’ve reached that two-sided vibrancy. We’re working on other markets like France, Canada, Australia, and we’ve only just begun to start to be buyer facing or getting ready to be buyer facing in India.
So India is — a few years ago, we started investing for it to have a robust export market. There’s wonderful supply and unique gorgeous items and categories in India that you can’t get anywhere else in the world. We’ve had a big external facing. And there’s a lot of sort of ground foundation to lay in India in order for it to be a domestic marketplace, but we’re beginning to make some of those investments to things like the payments infrastructure, compliance and other things. So lots of opportunities in India and also in the rest of the EU.
One of the compelling things about buying Elo7 was it was a robust two-sided marketplace in Brazil, where we had — we hadn’t — we were starting from a standing stop in that market and would have taken us a long time to get that two-sided vibrancy built up. With Elo7, they have been very successful in getting that ecosystem built. So it gives us a great acceleration to start in that very big market.
Maria Ripps
Great. Can you talk for a minute about your sort of buyer and seller community in both Ukraine and Russia? And how the ongoing conflict in Ukraine could potentially impact the business?
Rachel Glaser
Yes. So first of all, such an unfortunate situation unfolding in front of us and very much sympathy and compassion for the people of the Ukraine and the people of Russia and what’s going on there. We — one of the things we care about a lot — we care about our seller community very much but also buyers, so Ukraine and Russia are both mostly export markets. And so buyers from any part of the world could be buying — let’s start with Ukraine, could be buying from Ukraine. And the first thing we saw was that most of Ukrainians unable to ship out.
So a buyer could be expecting something to arrive, and we could see that they were never ever going to get it. And so one of the first things we did was we went in and helped those sellers. We identified which sellers were going to be very unlikely to be able to ship their item and we helped those sellers put their shop on a vacation mode, which they could opt themselves out of if they do want to be on that vacation mode. And identified which sellers — some sellers have digital downloads, for instance. So you can download personalized stationery and things like that, and they didn’t need to — they weren’t hampered by the shipping issue.
So we identified which were which and helped the sellers mostly because we wanted the buyers to have a great experience. That’s separate from sanctions, which mostly impacted Russia sellers. And so we immediately were able to comply. And this is one of the things about Etsy that, I think, became very prominent in the pandemic, but also in the Russia-Ukraine crisis is our agility to be able to immediately be able to respond to sanctions or other marketplace integrity issues where we can pull content down very, very quickly. And though it’s painful, we were able to get all of the Russian sellers down at a time where we could see that the fulfillment was going to be very difficult and/or we were sanctioned in some ways, and we required to bring them down.
The thing we talk about a lot is that when we see sellers leave the platform or we see something like this, where we’re required to take them down because of a compliance issue, we rarely lose the GMS because we have so much supply that we can usually satisfy the demand from the customer with another seller’s supply. And so even though these — both of these markets represent a very small percentage of our total GMS, we don’t expect a lot of GMS hit from it because we can satisfy that supply with others. There’s about 1% of our GMS sold from Russia and about 2% from Ukraine. That doesn’t mean there’s a 3% decrease in GMS from these markets. There may be some initial impact because with the substitution effect, we think we can offset most of that with other sales.
I will say there’s a mind share and distraction coming from this from this, we often call it CNN effect like climate disasters and other natural disasters and political events and things often distract people from shopping and they — for a while, and they turn their attention to the news, and that’s a possibility that we’ll be seeing that during this period of time as well.
Maria Ripps
Got it. That’s very helpful. So let’s talk for a minute about your recent acquisitions and sort of house of brands. You talked about Elo7 in Brazil. So related to the Depop acquisition, how does the platform’s younger sort of customer base, complement your core marketplace?
And what tactics do you plan to use to sort of cross-sell to these users?
Rachel Glaser
Great question. Well, we don’t plan to cross-sell necessarily. They have a — we think the brands really stand for something and Depop, the brand, is very — it has its very strong independent persona from an Etsy brand. It would probably be a pretty enjoying experience if you came to Etsy and typed in vintage jeans and you found yourself on the Depop site. What am I doing here, does Depop — does that marketplace have as much inferred trust and safety as Etsy’s does.
There’s a lot of reasons why we don’t do that today. I mean I’m not saying it’s not an opportunity we could pursue in the future. But for the moment, for the foreseeable future, we’re thinking of these as independent marketplaces. But we know a lot — Etsy has done, over the years, very good at some of the core competencies you need to be a two-sided marketplace. So we know a lot about performance marketing.
We know a lot about search. We know a lot about member support and trust and safety. We have a robust payments platform. And so the goal with Depop specifically, was to take a really fast-growing, robust, two-sided marketplace and be able to help them — we feel like we have the core ingredients to help them accelerate that growth by giving them the Etsy playbook. As I said earlier, they also are in one of the categories that we are in, and that’s the fashion, apparel and accessories category that they are a piece of it that is even faster growing than the traditional fashion and accessory category, and that’s the recommerce space.
And that’s something that we weren’t really doing. So they help us further penetrate the fashion category of our TAM. And they have this very different demographic where they’re very firmly — their core demographic is Gen Z. So I think ages 13 to 18 or thereabouts, where Etsy is really 24 to 54 or older. And so that’s something for us to further penetrate, sort of the new buyer categories and perhaps as they — as those buyers age, they can graduate to one of our other brands.
So we see — we’ve done some level of integration, particularly in the G&A functions where we don’t have to have multiple tax teams. We don’t have to have multiple compliance teams. So we’ve been able to get some sort of synergy and economies of scale from providing those sorts of services. And I could see a point in the future where there are other parts of our business where there could be platforms that run across and support our entire house of brands. Payments is just an example I throw out there.
But as an example, that’s a place where do we need separate individual Etsy payments in every one of these house of brands or can we service all of them. And so we look to those kinds of synergies over time that might be attractive.
Maria Ripps
That makes sense. And I think we have just a few minutes left here, but I do want to ask you about your take rate, and I’m getting quite a few questions here, webcast about your take rate. So you recently announced that your take rate for Etsy core marketplace would increase from 5% to 6.5% beginning in April. Can you just talk about why this was the right time to raise the fee? And what areas are you going to be reinvesting this incremental revenue into?
Rachel Glaser
Perfect. So yes, that’s correct. The April 11, we’ve announced it to sellers, April 11 is when it will launch. The last time we did a transaction fee increase was 2018. But if you look back, we’ve actually increased our take rate almost every single year since then, because we’ve done things where we’ve expanded Etsy Payments, for example, we launched our off-site ads program, which took take rate up by about 1%.
We did — we made some inroads on Etsy fulfillment so that sellers were thinking about shipping costs more as a part of their total item price and that effectively took take rate up as well. So we’ve been able to grow take rate and we always talk about it in terms of what is the fair exchange of value, not just a money grab. But if we provide an additional service that helps — that benefits the sellers and helps them grow, what is the fair exchange of that value back to Etsy. So when we did the transaction fee increase in 2018, we reinvested in 80% of that incremental revenue back in marketing and member support to help our sellers businesses. And they — we started our TV campaign at that time, which seller — was a visible thing that sellers could see that we’re taking all of that money and helping sellers get more sales, which is what they really, really want.
So we’re doing the same thing now. For starters, I think when you look just at that headline transaction fee of 6.5%, we’re still on the low end compared to other marketplaces. All in, we’re closer to 18% take rate. We’re still in the middle of the pack. We’re not at the high end.
So I think we’re still a very good value, particularly when you break out what you’re actually getting for that transaction fee and for that overall take rate. And just as we did in 2018, we’re planning to reinvest a significant amount of that incremental revenue back in the marketplace, some in marketing.
And in other things, when you think about the whole idea of the experience the buyer has post purchase and how we can better support both the buyer and seller when things don’t go right. If they get things get lost in mail, if they arrive damaged, how can we better support our sellers and buyers there and creating the capacity to be able to have our buyers back all the time. So we’re really excited about taking this take rate and how much value we’re going to get back to the sellers in the quarters ahead.
Maria Ripps
Got it. And what has the reaction from sellers has been so far?
Rachel Glaser
So you always get — when you take a price up, you know that sellers aren’t going to be happy. So we — and Etsy doesn’t do anything without a tremendous amount of research. So back in 2018, and again, now we did a fair amount of surveying our sellers and we masked exactly what we were doing by asking a lot of questions, how would you tolerate this or how do you feel about that? So we expect a certain amount of — ranging from neutral to outright rage. We expect a certain amount of feedback coming from sellers.
In fact, in 2018, we expected a lot more range than we got. And we expected enough seller churn that it would actually hurt our GMS. But in fact, we saw a normal amount of churn and no impact to GMS. So we were pretty well prepared for this time around where we expected a certain volume of inbound criticism or comment from our sellers. We’re getting about 1/5 what we expected.
And the tone of it has been a lot — yes, there are some haters, but a lot less — a lot more towards the neutral end of the range is how I would characterize it. We feel pretty confident, sometimes we have to do — we have the vantage point to know what the sellers need, not necessarily what they’re asking for. And we have the vantage point to know that we’re going to be able to use this incremental revenue to really help them in the long term. And we have a pretty high level of confidence that, that once they see the incremental marketing and see the incremental sales, that they will be pleased with the result.
Maria Ripps
Rachel, this is great. And just to wrap up our discussion, last year, at this event, we asked our participants for one prediction about the e-commerce space. And your response was that consumers would end up shopping from a smaller subset of our online platforms. And only a select group of platforms will ultimately achieve this and that brand building investments are proven particularly valuable. So I guess two questions here.
How do you feel about these predictions now a year later? And then what would be your one prediction today about the e-commerce space that you think might surprise people over the next 2 or 3 years?
Rachel Glaser
I think, I sort of stand behind what I said last year, given what happened in 2021. We continue to gain market share due to the differentiated offering that we have and that we’re on the right track that we have — we stand for special and that we — it’s hard to think of a competitor out there that is exactly an Etsy.
Maria Ripps
Got it. All right. It’s been an incredibly insightful discussion, Rachel. Thank you so much for joining us.
Rachel Glaser
Thank you for having me. Nice to see you.
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