Yesterday Etsy, Inc. (NASDAQ: ETSY), an online marketplace for creative entrepreneurs, announced that it is making some big changes, including a sharpened focus on key growth initiatives and realigning its internal resources to maximize value to stakeholders. Under the direction of new CEO Josh Silverman, the company plans to prioritize specific areas including search and discovery, improving the customer experience, driving frequency, maximizing their marketing spending, and providing world-class marketing tools to Etsy sellers.
“My conviction that Etsy has a unique opportunity within the ecommerce space has intensified during my initial weeks as CEO. Our vibrant community, strong brand affinity, 45 million listings, and ability to connect people through commerce provide us with a differentiated offering and solid foundation for growth. By focusing on our ‘vital few’ initiatives, we will be a more disciplined company that is better positioned to create the world’s most compelling buying and selling experience,” said Silverman in the announcement.
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As part of the realignment of resources, the company will cut approximately 140 jobs, which equates to about 15 percent of Etsy’s existing workforce. These staff eliminations are in addition to those announced on May 2, for a grand total of about 230 jobs, or 22 percent of the company’s employee headcount. Most of the job cuts will occur in Etsy’s Brooklyn headquarters, and most of the jobs to be eliminated will be marketing, product management, and general & administrative functions.
“In order to drive focus, we took decisive steps to double down on the fewest, highest-impact initiatives in our core marketplace while de-prioritizing other projects and streamlining our resources. Parting ways with our colleagues is not easy and I am thankful for their contributions. We are moving forward with a more nimble structure that supports our current business needs and allows for faster execution so we can better serve creative entrepreneurs around the world,” Silverman added.
This round of job cuts and related expenses will range between $6.0 million and $8.8 million, on top of the $6.5 million to $8.0 million for the job reductions announced in May when the company released its first quarter financials for 2017. While the company had total revenue of $96.9 million, an 18.4 percent increase year-over-year, and a gross profit of $62.2 million, a 15.4 percent increase year-over-year, Etsy also reported a net loss of $0.4 million, a 135.3 percent decrease compared to net income of $1.2 million for the first quarter of 2016.
Silverman joined Etsy’s board of directors in November 2016, and was appointed CEO effective May 3. As the former CEO of Skype, CEO of Shopping.com, and CEO and co-founder of Evite, Inc., Silverman brings 20 years of technology, product development, marketing and e-commerce experience to Etsy.
The news of layoffs and realignment have had a positive impact on Etsy’s stock value in morning trading Wednesday. On May 3, the day after first quarter 2017 financials were released, stock was valued at $10.51 per share. As of 11:22 AM EDT yesterday, Etsy’s stock was valued at $14.04 per share, a 33.5 percent increase over the May 3 price.
Because of the high employee separation costs involved, Etsy is unlikely to see a reduction in expenses this year, but in the long-term, provided Etsy doesn’t lose momentum in key growth areas, these cost-cutting measures could be beneficial for Etsy. Though vague in the announcement, Silverman clearly has a plan for how Etsy needs to shift its focus in the coming months to keep revenue growth up and spending down. We don’t want to predict the outcome of Silverman’s efforts, but we do appreciate the fact that he was consulted as Etsy was starting to lose momentum. The company has huge potential, including its relatively new subscription offering, Pattern, for sellers to help them better market themselves. We hope these growing pains help Etsy reverse its losses.