Etsy GMS & Active Buyer Losses Continue With Q1 2025 Earnings Report
Etsy Gross Merchandise Sales (GMS) and Active Buyers continue to decline as company reports Q1 2025 earnings.
Important stats from the press release:
Consolidated GMS [including Depop and Reverb] was $2.8 billion, down 6.5% year-over-year and down 5.7% on a currency-neutral basis.
Etsy marketplace GMS was $2.3 billion, down 8.9% year-over-year and down 8.1% on a currency-neutral basis.
- Active buyers decreased 3.4% year-over-year to 88.5 million.
- We reactivated 6.5 million buyers, up 2.1% from the prior year period, and acquired 4.8 million new buyers.
- GMS per active buyer on a trailing twelve month basis for the Etsy marketplace declined 3.5% year-over-year to $120.
- The number of habitual buyers was 6.2 million, down 11.0% year-over-year.
As a reminder, starting March 3rd, Etsy made changes to how sellers charge for packaging and handling costs, a move that will muddy year over year GMS comparisons for at least the next year
Liz Morton
While the main Etsy marketplace continues to struggle, subsidiary Depop continued to see strong growth in the US with GMS for Q1 the highest it has been since the business was acquired in 2021.
Depop dropped selling commision fees for the US in July 2024 (though sellers still pay payment processing fees) and instituted a buyer side Marketplace Fee instead after successfully making the same changes in the UK earlier last year.
Liz Morton
eBay made similar changes in the UK as well, first introducing fee-free selling for private, consumer to consumer sellers in October and then bringing in a Buyer Protection Fee starting in February - but eBay CEO Jamie Iannone has said they have no plans to bring buyer fees to the US because it is a different market and UK buyers were more willing to accept it as a "standard practice."
Since Depop is now reporting strong performance in the US with their split fee model, it will be interesting to see if eBay's position on the subject will change in the coming months.
Etsy also recently announced it is selling off Reverb and the 10-Q report filed with the SEC today finally revealed details of the sale.
Liz Morton
During the three months ended March 31, 2025, circumstances changed for the Reverb reporting unit, making a sale of the business more likely than not. This
triggered a quantitative impairment test of its goodwill, finite-lived intangible assets, and other long-lived assets as of March 31, 2025.The quantitative analysis indicated that the fair value of finite-lived intangible assets and other long-lived assets was sufficiently in excess of its carrying value.
However, the carrying value of the Reverb reporting unit exceeded its fair value, resulting in a non-cash goodwill impairment charge of $101.7 million in the three months ended March 31, 2025 to write off goodwill in full for the Reverb reporting unit...
...On April 21, 2025, the Company entered into an agreement to sell Reverb, its musical instrument marketplace...for a purchase price of $105.0 million in cash.
The purchase price is subject to certain closing adjustments. The transaction is expected to close in the coming months, subject to customary closing conditions.
Despite the continued downward trend in GMS and Active Buyers, Etsy's revenue was up a tiny 0.8% due to increased take rate of 23.3% - a new quarterly high according to CFO Lanny Baker.
That slight revenue bump was achieved largely on the backs of sellers from ad fees, shop set up fees, and the expansion of Etsy payments.
Consolidated revenue was $651.2 million, up 0.8% versus the first quarter of 2024, with a take rate (i.e., consolidated revenue divided by consolidated GMS) of 23.3%.
Our positive revenue growth was driven primarily by significant growth in on-site advertising revenue for both Etsy and Depop, a full quarter impact of the seller set-up fee, and continued benefit from Payments expansion.
Speaking of ads, one interesting tidbit from the press release is that Etsy is now offering 'Checkout on Merchant' for YouTube ads, enabling users to directly add Etsy products to their cart from ads shown on YouTube.
The press release also touted recent updates Etsy has made to improve the app and all the ways they are using AI to enhance both the buying and selling experiences but the rosey picture the company paints doesn't always match up to actual user experiences in real life.
Liz Morton
And of course the big question on everyone's minds: how will tariffs and the ending of the de minimis exemption impact Etsy's business?
The press release didn't offer any detail besides a general statement about what Etsy is doing to keep sellers informed of the constantly changing tariff landscape:
To address the evolving tariff landscape, we established a small operational task force focused on delivering creative solutions for the Etsy marketplace community.
Our efforts to date include providing buyers and sellers with timely guidance through informational banners and emails on shipping timelines; enhancing the buyer experience by improving search and filter capabilities to surface locally shipped items and reinforcing "shop local" messaging across owned and paid marketing channels; and preparing robust educational resources and support for sellers.
Liz Morton
CEO Josh Silverman put Etsy's advocacy for small businesses at the forefront when asked about the trade war at Semafor’s World Economy Summit last week, arguing that the de minimis exemption should be kept in place at least for some countries to avoid small businesses becoming "collateral damage."
Allison Prang
Silverman said the administration’s trade policies are focused on large companies, and could hurt small businesses.
“If we’re prepared to make exemptions for Apple, shouldn’t we be prepared to look after a single mother working from her home, making something and selling it to someone else?” Silverman said at Semafor’s World Economy Summit in Washington.
Even though there are corporations that abuse the duty-free de minimis exemption rule, which President Donald Trump earlier this month tried to curb with a new executive order, there’s room for “common-sense reform” of that policy, said Silverman.
He said he “had a constructive meeting” on Thursday with the National Economic Council regarding the exemption, among other issues.
Silverman’s ideal situation is “to maintain the de minimis exemptions for the honest small sellers working with trusted trading partners like Europe, like Canada, to make sure that … we can still allow people to start a business without causing too much friction,” he said.
The quiet part that Silverman isn't saying out loud?
Despite Etsy's original positioning as the home for handmade goods, in recent years the platform has been overrun with mass produced items often dropshipped from AliExpress and other overseas suppliers.
While the company has taken steps over the last year to crackdown on some of the most egregious violators, it's still a massive problem on the site.
Liz Morton
If the tariff and de minimis situation continues on its current path, it could finally expose just how much of Etsy's GMS is derived from overseas dropshipping - a prospect that Silverman will want to avoid at all costs.
And as AdWeek points out, if Etsy loses GMS due to tariffs - they'll likely look to make it up by increasing ad revenue from existing sellers.
Mark Stenberg
Finally, Etsy's guidance for Q2 2025 shows they expect a similar decline in GMS and similar take rate as Q1 2025.
A recording of the Q1 presentation will be available on Etsy's investor relations site after the call.
