Etsy recently shared its first-quarter performance for 2025. Let's look at the main points and what they could mean for your shop.
The Overall Picture:
Etsy saw a decrease in its Gross Merchandise Sales (GMS) for the quarter, with the Etsy marketplace GMS down 8.9% year-over-year. Metrics like new and habitual buyers also saw a dip. This reflects a challenging broader retail environment. On a positive note, Etsy did see a 2.1% increase in "reactivated buyers" – customers returning to the platform.
Etsy's Core Strategies & Initiatives:
Etsy is actively working to navigate these conditions and is making significant investments in several key areas:
- AI-Powered Personalization and Discovery:
- This is a major focus. Etsy is expanding its "Algotorial Curation," a blend of human expertise and AI (including Large Language Models or LLMs) to create highly personalized shopping experiences. They highlighted that this approach can increase the number of listings per theme by approximately 80 times compared to purely manual curation.
- They are capturing substantially more data about buyer interests (from Search, Recommendations, and Ads – over a third more data than from Search alone compared to late 2024) to refine these personalized experiences.
- Expect more tailored recommendations, search results, and even marketing messages. Etsy is testing Generative AI to personalize marketing copy at scale and has increased the share of personalized emails and push notifications.
- The Etsy App Continues to Shine:
- The Etsy app is a standout performer, with its share of total GMS reaching its highest ever. App GMS is significantly outpacing non-app GMS, and downloads from first-time app users are up year-over-year.
- Etsy is enhancing the app with features like a new discovery-focused 'Shop' tab.
- Category Performance & Top Categories:
- Etsy noted that its top six categories, which collectively represented approximately 87% of GMS in Q1 2025, declined on a year-over-year basis. This underscores the importance for sellers to stay informed about current trends within their specific niches.
- As a reminder, the top categories by GMS percentage in Q1 2025 were:
- Home and Living (35%)
- Jewelry & Accessories (18%)
- Apparel (13%)
- Craft Supplies (9%)
- Paper & Party Supplies (8%)
- Toys & Games (4%)
- Driving Buyer Traffic & New Channels:
- Etsy has significantly increased its investment in Paid Social marketing (up 46% year-over-year).
- They are exploring new ways for buyers to discover Etsy products, such as "Checkout on Merchant" for YouTube ads (simplifying the purchase path) and participating in third-party AI-driven shopping experiences like OpenAI’s Operator and in-app purchasing in Microsoft Copilot.
- Supporting Domestic Sellers:
- There's an ongoing effort to make it easier for buyers to find items that ship domestically and to highlight sellers based in the same country as the buyer.
New Seller Tools & A Nod to Alura:
- Etsy is rolling out enhancements for sellers, such as improved listing photo editing capabilities with custom filters.
- Crucially for third-party tool users, Etsy has introduced "Etsy Apps" directly within the Shop Manager. We're proud to share that Alura is featured on this new Etsy Apps page, making it even more convenient for sellers to access tools that can support their business.
Key Considerations for Your Shop:
- Listing Quality for AI: With the heavy emphasis on AI-driven discovery, high-quality photos, detailed and accurate titles, descriptions, and attributes are more critical than ever for your listings to be effectively surfaced and personalized.
- The Mobile Experience: Given the app's strength, ensuring your shop and listings are optimized for mobile viewing is essential.
- Stay Adaptable: The e-commerce landscape, including category demand, is dynamic. Continuously researching trends and understanding buyer behavior in your niche will be beneficial.
Etsy is clearly focused on leveraging technology to create a more engaging and personalized platform, even amidst a shifting economic landscape. Staying informed about these developments can help you adapt your strategies effectively. Our own data also suggests that customizable and personalized items continue to perform well, which aligns with Etsy's push for unique, special purchases.
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