In February Etsy released their financial report for the last quarter of 2022. As always this is our chance to take an insider look at the big picture and below we will examine the current climate for Etsy sellers.

This is the latest overview of Etsy performance and although it reflects the end of 2022, it's the best approximation of Etsy performance at the start of 2023 and the sentiment and plans of Etsy management for the coming months. Below you will find a breakdown of several key takeaways from the Etsy financial report that will help you benchmark your performance and adjust your Etsy strategy and goals for 2023.

Total Etsy revenue (GMS) in Q4 '22 was $4 billion, down 4% compared to Q4 '21

At the end of 2022 Etsy saw a slowdown compared to the previous year. On the other hand, in the financial report presentation we frequently find comparisons of Y/3Y (year-over-three year basis), essentially comparing 2022 results to the pre-pandemic 2019. The growth is significant - over 150% and Etsy is holding strong to this level.

Etsy retained almost all of its pandemic growth in 2022 and
Etsy GMS revenue is up 150% compared to pre-pandemic levels

In Josh Silverman's words - “Despite significant macroeconomic headwinds, we maintained the vast majority of our pandemic gains." And here we are in agreement - the first and highest priority is maintaining the performance from the past years and Etsy delivers on this. There are still 90 million active buyers on the platform with 9.5 million new buyers brought in during the last quarter of 2022.

Etsy is generating a strong inflow of purchasing power and the main objective for you as an Etsy seller remains to take the biggest share of orders in your respective niche.

Expected Etsy sales in Q1 2023 are $2.95-3.15 billion, down ~8% compared to Q1 '22

Etsy expects 10% lower sales in the first quarter of 2023 - January, February and March (again we are talking Etsy GMS here). This number arrives mid-Feb so it generally reflects Jan and Feb 2023 results. Here are the key factors for Q1 '23 Etsy performance:

"Headwinds" is what Etsy leadership refers to in the past years to describe factors slowing down growth.

The main reasons for an Etsy revenue drop at the macro level in Q1 '23 are:

  • the reopening of offline retailers;
  • the inflation and effects of potential recession leading to lower employment and lower discretionary spending, e.g. left-over money for non-essential expenses like Etsy purchases;
  • geopolitical events and uncertainty that impacts "mindshare", e.g. people are worried and spend less time on Etsy looking for quality finds.

These are meaningful challenges that we are all observing firsthand. And despite all of this, the performance is holding on strong to the best-ever levels of 2021. The expected decrease is minor and fairly represents the impact of the overall economic situation on a well-performing marketplace.

We will see how other sectors of the economy will be impacted throughout 2023 but overall the Etsy ecosystem proves its resilience once again after it skyrocketed during the pandemic. Thanks both to Etsy sellers and good decision making from Etsy staff, the pandemic actually became one of the greatest opportunities in the history of the marketplace while many other businesses suffered. Now we expect similar stability despite the rocky start of 2023 in other sectors of the economy.

As always, the pie is never split evenly and at Artery Team we are committed to outperforming the average and generating meaningful growth for every store we work with. At the same time, you should always take into account that Etsy expects a 10% drop on average and your first priority is to achieve 2022 revenue levels again.

2023 changes to Etsy search

The financial report is actually a very interesting source for Etsy search algorithm updates that might otherwise go unannounced. Here are the two most important ones from this report.

How to use pricing to rank in Etsy search?

Etsy has essentially incorporated weighted price level, e.g. price compared to similar products, into its US search algorithm. We know that the majority of Etsy sellers would instinctively consider this a piece of bad news. But there are always two sides to every coin and this can be a great way to generate a competitive advantage in Etsy search.

A good Etsy pricing strategy can help you boost your store's Etsy search ranking. At the current moment, our tests show that US Free Shipping doesn't play a big enough role in most niches, and bringing this together with the latest news, it appears that lower prices and paid shipping may be a better strategy in the coming months.

One of the ways to take advantage of this is to offer one or more of your listing variations at a lower price. This will feed your listings into the Etsy search algorithm with a lower base price that will be taken into account when ranking your listings. You will see a quick example below. While not every product makes variations-pricing easy, it's worth it to take a second and think about how you can approach this for your key products. On the one hand, it's simple enough, on the other - many stores won't bother thinking about it and this is usually the recipe for getting an edge.

The base price shown in Etsy search comes from the lowest-priced variation of the listing

Can you rank better in Etsy search through Etsy Star Seller status?

The next update is related to the Star Seller status - it's already moving in to play a bigger role in search ranking:

The Etsy financial reports contain Etsy search algorithm news that otherwise go under the radar.

While Etsy states this is still in testing phase, the results appear to validate a wider roll-out and integration of both Star Seller and listing reviews into the algorithm throughout 2023.

The Etsy Star Seller badge is a great way to distinguish your store and finally, this will be happening as early as search ranking. A lot of the stores in our group are already at Star Seller status and if you are still struggling with this - you can find my letter from last month for some useful tips and tricks.

Two out of three Star Seller KPIs are related to great Etsy customer service. Pay special attention to communicating with your customers and any issues you might be having with reviews will be much more easily solvable. Having a helpful and friendly attitude pre-purchase and supporting customers through the whole process makes good reviews much more likely even if issues arise later on.

2023 Etsy Outlook

Overall, Etsy is starting the year with a slight drop and this has been happening for several quarters already. By now this should be clear for everyone and Etsy management have repeated in a number of times - the 2020-2021 results were greatly boosted by the pandemic.

Even so the revenue levels we are seeing on Etsy this year are very close to the best-ever sales months and quarters that the pandemic brought. It's important to note that growth will be harder to achieve this year and will require more marketing efforts to stand out in search and to engage buyers. Just make sure you don't take growth for granted and give maximum effort to make the most from the current market situation. We are all in a very good place with the biggest opportunities so far for top stores to stand out.

To take a look at the full Etsy Q4 2022 presentation click here.
To see the press release with further highlights
click here.

Iliyan Oprev
Founder & Managing Partner

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