E-commerce player Etsy’s (ETSY) growing user base is testimony to the company’s strong business model and customer-retention efforts. Focused investments in marketing are also driving both sellers and buyers to the platform.
In the third quarter of 2021, Etsy added 7 million new buyers to its Marketplace platform. Moreover, habitual and repeat buyers grew 65% and 35% respectively, demonstrating the success of the platform in attracting and retaining users.
Last week, Needham analyst Anna Andreeva spoke to Etsy’s management team and made note of a few key points that are driving the company’s growth. (See Analysts’ Top Stocks on TipRanks)
Forces Behind Etsy’s Business Growth
First, Etsy runs mostly on domestically-sourced products. About two-thirds of the products listed on Etsy come from U.S.-based sellers. This means that the business is less affected by international supply constraints or other supply chain issues. This supply chain advantage is helping the company gain share of its addressable market.
Moreover, the post-purchase experience of the platform has improved greatly, with late orders having been cut in half. About 95% of Etsy’s products come within the expected delivery date.
Etsy’s focus on encouraging purchase frequency, through improvements in product engineering and marketing, is another factor that is driving users to its platform. In the last quarter, the company launched personalization services to help shoppers find what they are searching for, which, Andreeva expects, will further drive customer retention.
The analyst is also encouraged by Etsy’s efforts to cash in on the upcoming holiday season, and expects it to drive further upside. “Etsy just started running a Cyber Week Sales Event on the app, with up to 60% off —we think a smart move to gain share in the midst of a competitive time for the industry,” observed Andreeva.
Encouraging Traffic Trends
With the help of TipRanks’ Website Traffic tool, we found that visits to the Etsy website from unique visitors have been steadily rising since August.
Moreover, when we looked at the quarter so far, we saw that there has been a 1.49% growth in unique website visitors from the same period last year. Also, a 21.89% increase in the same was seen in this year so far, compared to the same period last year.
These trends have possibly been influenced by the factors mentioned above.
Analysts Opine
Andreeva reiterated a Buy rating on the Etsy stock, and raised the price target to $325 from $265. “The company is still in the early innings of several product and marketing initiatives to engage and retain the record-high number of buyers and sellers added to the platform in the last 18 months, which should improve visibility, awareness, and mind-share among consumers, ultimately invigorating GMS (gross merchandise sales) growth and profitability for years to come,” she said.
Turning to Wall Street, the analyst consensus has a Strong Buy rating, based on 10 Buys and 2 Holds. The average Etsy price target of $271.64 indicates a downside potential of 2.72%.
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Disclosure: At the time of publication, Chandrima Sanyal did not have a position in any of the securities mentioned in this article.
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