Etsy: ecommerce platform takes on the fee fighters

Macramé plant holder makers of the world unite. Online marketplace Etsy’s decision to raise transaction fees from 5 per cent to 6.5 per cent last month led to a shortlived seller strike. The fight mirrors an argument over fees between app creators and the app platforms owned by Apple and Google. But while regulators bear down on app fees, Etsy sellers should brace themselves for even higher charges.

The 18,000 or so sellers who downed tools make up a tiny fraction of Etsy’s 7.7mn active sellers. The company’s bid to raise revenue has not been derailed just yet.

Etsy would like to frame the increase as part of a plan to take on large ecommerce rivals such as Amazon. Chief executive Josh Silverman claims it will enable Etsy to increase marketing, which should raise sales all round. It also argues that it earns its fee by showcasing creators, processing payments and facilitating customer engagement. But the move is also a buffer for the company against falling sales.

Launched in 2005, Etsy has carved out a niche as a place where individuals sell handcrafted items. That helped growth at a time when larger retailers were struggling to manage supply chain problems. Sales of masks and homeowners stocking up on furnishings also bumped up revenue in the pandemic. The company’s share price rose by more than 500 per cent between 2020 and late 2021, enabling it to spend $1.6bn accessing younger customers by buying second-hand shopping platform Depop.

But buyer growth has slowed and is expected to go into reverse as inflation bites. That leaves Etsy to seek more revenue from sales. In the first quarter of 2022, the total value of sales rose 3.5 per cent while revenue rose 5.2 per cent, meaning Etsy’s take-rate has improved.

In the second quarter the company forecasts that gross merchandise sales could be a tenth lower than the previous year. Claims of a total addressable market as large as $2tn look increasingly unrealistic. Without a rise in buyers, the company’s only move is to claw back more from sellers.