Etsy walloped expectations this week, reporting Thursday that fourth quarter gross merchandise sales rose nearly 118% year over year to $3.6 billion as revenue rose 129% to $617 million. With masks driving 4% of sales in the quarter, the marketplace was compelled to note in a press release that GMS excluding masks rose 118% to $3.3 billion.
At the end of the quarter (also the end of the year), the number of active buyers was up 76.7% year over year to 81.9 million. The company added twice as many new buyers in 2020 as it did in 2019, CEO Josh Silverman told analysts on a conference call, per a Seeking Alpha transcript.
Net income in the quarter rose 374.7% to $148.5 million. For the full year, GMS rose 107% to $10.3 billion, revenue rose 111% to $1.7 billion and net income was up 264.2% to $349.2 million.
Shortly after going public in 2015, Etsy confronted a fork in the road: invite in more sellers and risk losing its crafty-vintage ethos, or stick with the maker ethos and risk growth opportunities. Six years on, Etsy's decision to end its flirtation with over-expanding its seller base and instead embrace its maker origins looks brilliant.
That may be best exemplified by the mittens worn by Sen. Bernie Sanders at President Joe Biden's inauguration, which in the days following drove countless memes across the internet and $1.9 million in sales of mittens and related items at Etsy.
The pandemic has also fueled demand of other items, notably the sales of masks, which public health officials have touted as one of the most effective means of preventing the spread of COVID-19 and have also propelled sales elsewhere. But few retailers aside from local shops, hobby, art supplies retailers and Etsy are benefiting from the explosion in arts and crafts as people look for ways to spend time stuck at home and find meaning in what has been a whole new kind of daily grind.
It's an important differentiator at a time when many consumers seem particularly partial to local and small businesses, which were already vulnerable to competition from giants like Amazon, Walmart and Target before the pandemic. And when promises of super-speedy delivery, even from Amazon, have been thwarted amid supply chain delays. That differentiation will be in focus this year, Silverman said.
"And honestly, I think, a big part of it is we stand for something different. There's a bunch of places you can go where you can buy the exact same thing as somewhere else," he said. "And maybe it's $0.02 cheaper and will arrive an hour faster. And that's not always what people are solving for. And so I think the fact that we own a space in e-commerce that I think is both different and important is meaningful. And, I think, that that means we have a real opportunity to grow share and continue to grow share over time. We're not following everyone else's playbook."
With vaccines rolling out and the pandemic easing in some places, the demand for masks and home goods, both popular categories in this COVID year, appears to be lessening. But that demand will be sustained to some extent a while longer, and Etsy will continue to benefit, according to a note from Jane Hali & Associates.
"We believe that ETSY’s growing assortment is strong and unique," they said in emailed comments. "The platform maintains key categories that interest consumers, including home, toys & entertainment, craft supplies, pet and beauty. Some of ETSY’s sellers also offer product customization. We expect the home category to remain key for ETSY as consumers seek unique furniture and décor for their homes."