Etsy Trims Workforce in Response to "Challenging" Market, Stock Takes a Hit

December 18, 2023 : Etsy, the online marketplace known for its handcrafted and vintage goods, has announced a significant workforce reduction, laying off 11% of its employees. This move, affecting approximately 225 individuals, comes amidst a “very challenging” macro-economic and competitive environment, according to CEO Josh Silverman.

The news sent Etsy’s stock plummeting 7% in after-hours trading, raising concerns about the company’s prospects. The layoffs primarily impact the core Etsy marketplace to streamline operations and reduce costs. While Etsy’s marketplace has doubled since 2019, Silverman acknowledges that it needs to adapt to the current market realities.

Several factors contribute to the “challenging” environment Etsy faces:

• Stagnant Sales: Gross merchandise sales, the total value of goods sold on the platform, have remained flat since 2021. This means Etsy needs to be more effective in bringing sales to its nearly 7 million sellers, a crucial metric for its success.
• Economic Headwinds: Rising inflation and global economic uncertainties impact consumer spending, potentially reducing purchases on Etsy’s platform.
• Increased Competition: The online marketplace is becoming increasingly crowded, with established players like Amazon and emerging platforms vying for the same customer base.

Etsy’s decision to lay off employees reflects its attempt to adapt to these challenges. The company expects the streamlining measures to lead to a 27-28% adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) margin, up from previous guidance. However, the move has raised concerns about Etsy’s commitment to its sellers and the potential impact on the platform’s culture and morale.

The layoffs also highlight the broader economic realities impacting tech companies across various sectors. As inflation and economic uncertainties persist, many businesses resort to cost-cutting measures, including workforce reductions.

Etsy’s future remains uncertain, and its ability to navigate this challenging environment will be crucial for its continued success. The company’s success in attracting new buyers, retaining existing sellers, and adapting to changing market dynamics will determine its ability to weather the storm and emerge stronger.