In this paragraph, the participants in the discussion, Rachel Glaser, Matthew Cost, and Josh Silverman, introduce themselves and discuss the company Etsy. They mention their Safe Harbor disclosures and the company's differentiation as a marketplace for handmade and vintage items. Josh Silverman explains their strategy for growth and their competitive advantages, such as their mission of "Keeping Commerce Human" and their focus on search and discovery and trust. They also mention the challenge of working with a large number of unbranded sellers.

Etsy's business model is unique and focuses on creating trust and personal connections with customers. This sets them apart from other companies like Amazon and allows them to offer personalized and handmade items. The company's three marketplaces, Etsy, Depop, and Reverb, all follow a similar business model and generate revenue through a two-sided marketplace approach. Etsy's expertise in this area has led them to acquire other marketplaces with similar business models.

Etsy has a large and active marketplace with over 90 million buyers and 6 million sellers. The platform charges sellers fees for listing items and transaction fees for sales. Optional services include paid ads and a shipping service. Other subsidiaries like Elo7 and Depop have similar business models, with the latter focusing on recommerce in the apparel category.

The Etsy business model is capital light, as they do not touch the inventory and sellers ship products from their own homes. This has resulted in strong EBITDA margins and a high percentage of EBITDA converting to free cash flow. The company has grown significantly during the pandemic and has maintained those gains, but has faced challenges over the past two years. These challenges are primarily related to macroeconomic factors and are not seen as structural issues.

The pandemic has shifted consumer spending towards dining out and travel, causing inflation and the end of government subsidies. Despite this, Etsy has seen an increase in active buyers and spending, with a higher retention rate compared to competitors. While facing headwinds such as high inflation and categories out of favor, Etsy continues to gain share against competitors.

The speaker discusses the current state of the economic cycle and the importance of not getting too optimistic or pessimistic. They also highlight the potential for growth in Etsy's market, as only a small portion of women and men have shopped on the site in the past year. The speaker then talks about the company's focus on increasing conversion and frequency of purchases, given the wide range of products they offer.

Etsy has a substantial opportunity to grow by expanding into new categories and increasing international sales. They don't need to create new purchase occasions, as there are already many opportunities for buyers on the platform. The challenge is to showcase the breadth of their offerings and overcome brand barriers such as concerns about delivery and pricing. However, Etsy has made significant progress in these areas and the buying experience on the platform is actually very good.

Etsy CEO Josh Silverman discusses the impact of Chinese ecommerce companies like TIMO and SHEIN on the market and their aggressive performance marketing strategies. Despite their success, Etsy remains focused on maintaining a strong ROI and will not engage in a "race to the bottom" for customer acquisition. Instead, they have reallocated some of their marketing budget to television advertising.

The company takes a strong ROI approach to their TV spending and is seeing good performance. They are willing to invest in other channels, such as TV, if it becomes irrational to invest in performance marketing. The company believes in doing something different and meaningful to earn a spot in consumers' minds. Unlike other ecommerce sites, they do not rely heavily on Google and Facebook for traffic. The company believes there is a significant opportunity to do even more to earn a spot in consumers' minds and the potential payoff is significant. Josh also mentioned the competitive marketing environment and how some China ecommerce companies are spending more aggressively on performance marketing. Rachel is asked to comment on how the company is reacting to this and if there are any actions being taken from the finance side to mitigate the competition.

The marketing philosophy at Etsy is to give marketers an ROI threshold rather than a fixed budget and to use a variety of channels throughout the sales funnel. They have recently tested using Etsy's P&L for promotional offerings and have found success in curating deals and sales from their 120 million items. Sellers on Etsy are also known for being promotional and offering discounts to customers.

Etsy has been working with their partners to determine the most effective promotional strategies, including a 10% off promotion versus higher promotional price points. They also use a dynamic model to ensure they are not spending into negative ROI territory. Their focus is on building brand awareness and consideration through television advertising, particularly in Germany and France where they are less known. While most people have heard of Etsy and express love for the brand, consideration and actual shopping on the platform is still a challenge.

The speaker believes that there is a lot of potential for Etsy in the consideration stage of the purchasing process, particularly in the areas of home, style, and gifting. They also mention that Etsy has a low level of brand recognition in the home furnishings category, despite being a major player in the market. The company plans to use performance marketing to increase brand awareness and consideration among consumers.

The speaker discusses how Etsy's take rate has increased over the past two years and is now just above 20%. They highlight the importance of offering value to sellers and mention potential opportunities for further take rate expansion, such as through new or expanded services like Etsy ads. They also note that Etsy's take rate is in the middle range compared to other companies.

Etsy does not offer a differentiated take rate for different categories, and they aim to provide a fair exchange of value for their services. They plan to increase their take rate by further rolling out Etsy Payments and investing in the marketplace. The increase in take rate will also bring up lifetime value and allow for more spending on advertising services such as Etsy Ads.

The growth of Etsy ads depends on the relevancy of searches and the conversion rate, which leads to a higher return on ad sales and more budget to spend. Only 50% of sellers currently use Etsy ads, but the company is working to improve the product experience to attract more sellers. In the long term, there is still a lot of potential for growth as many people have not shopped on Etsy and there are brand barriers that the company is addressing.

The majority of customers are satisfied with their experience on Etsy and the company has already made efforts to improve it. However, there is still room for improvement in making the platform easier to navigate and find the perfect item out of the millions available. The use of machine learning and future technology like Gen AI could greatly benefit Etsy in providing a personalized shopping experience for customers. This would lead to increased customer loyalty and success for the company.

This summary was generated with AI and may contain some inaccuracies.