Dive Brief:

• Etsy will lay off about 220 people, roughly 12% of its workforce, according to a letter to shareholders published Wednesday.
• In a memo to employees made public the same day, CEO Kruti Patel Goyal said neither cost cuts nor artificial intelligence spurred the move.
• The artisan-led marketplace Wednesday also reported year-on-year Q2 revenue growth topping 6%, not including Depop, which Etsy sold to eBay. The company swung into the red, from nearly $29 million in net income last year to a net loss of $46.7 million.

Dive Insight:

Under Patel Goyal, who took the helm as CEO at the start of this year, Etsy is embracing dichotomies.

The layoffs announced Wednesday are not about cost cuts, but are about restructuring, at least in terms of creating an organization “with fewer silos to reduce handoffs and flatter, faster teams built to solve broader, more complex problems,” Patel Goyal said.

Similarly, they are not about AI. “Ultimately, our future depends on the creativity, judgment, and expertise of our people,” she told employees. “The opportunity is to combine talented people with powerful new technology and not replace one with the other.”

“At the same time,” she also said, “AI is changing how all of us work, and it will continue to change how we build products and solve problems.”

In her shareholder letter, Patel Goyal also emphasized that “our differentiation as a human-centered marketplace is our greatest strength.” But the company also sees AI as key to its operations, and that includes furthering human connections.

As of May, Etsy’s app in ChatGPT is running live in beta, allowing customers to search for and compare items using natural language. Last month, Bank of America research analysts Michael McGovern and Justin Post called Etsy's native ChatGPT app “the most idiosyncratic swing factor” for the company’s prospects, in part because a more conversational approach to search should suit shoppers looking for the handmade goods that many Etsy sellers specialize in. 

“Prioritizing creativity, craftsmanship, human connection, and loyalty through the Insider program positions Etsy to compete on relevance rather than conversion and price,” they said. “This insulates the company where undifferentiated inventory is most exposed to AI-driven commoditization.”

More broadly, Etsy is benefiting from the e-commerce growth trends in the U.S. this year. In Q2, online spend increased 13% year on year, with 16% growth in June, according to the Bank of America report.

“This acceleration occurred despite tougher comps, suggesting more durable strength rather than just promotional activity,” McGovern and Post said.

In Q2, Etsy’s gross merchandise sales rose 1%, not including Depop. Chief Financial Officer Charles Baker in April warned analysts that factors benefiting GMS in Q1 would “moderate as the year progresses.”

According to Bank of America, “the bigger question will be the durability of growth into 4Q and 2027.”