The pandemic has been a tailwind for many e-commerce companies, including Etsy (ETSY -0.46%). In addition to being a popular shopping destination for people looking to buy face masks, the online marketplace offers up a broad range of unique goods that customers can't find anywhere else.
Even as the pandemic begins to wane, the latest earnings results strongly suggest that Etsy is still doing well. Here are three facts from that report that demonstrate the company's ongoing success. They also point to a solid future for the company whether a pandemic is affecting shopping habits or not.
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1. Etsy is servicing more habitual buyers
Etsy ended the third quarter with a remarkable 96 million active buyers. Excluding the recent acquisitions of Depop and Elo7, the main Etsy site counted 89.4 million active buyers, up 30% year over year. A buyer is considered active if that person has made one purchase within the past 12 months. Those who made purchases on two or more days in the last 12-month period, called repeat buyers, jumped 35% to 36.1 million.
But what really stood out was that Etsy's habitual buyers, its most loyal customers who shopped on at least six different occasions and spent at least $200 in the past year, were the fastest-growing cohort. As of Sept. 30, Etsy had 8 million habitual buyers. This was up 65% year over year and 237% on a two-year basis.
To see Etsy continue expanding its user base, particularly with a tough comparison in Q3 2020, is fantastic for shareholders. Furthermore, gaining habitual buyers who are familiar with the value of the platform and who Etsy doesn't really need to market to, is superb.
2. Etsy is growing non-mask merchandise volume
As I previously alluded, face masks have been a boon for Etsy during the pandemic. In 2020, they represented 7.2% of total volume on the platform. Things have changed since. "Overall, they represented less than 2% of Etsy marketplace gross merchandise sales (GMS) in the quarter," CFO Rachel Glaser noted on the Q3 earnings call, referring to face masks.
Non-mask GMS soared 23.7% compared to Q3 2020, greater than the company's overall GMS growth of 17.9% in the three-month period. And over the past two years, non-mask GMS is up 138%, which is in line with historical trends.
Buyers are attracted to the variety of products found on Etsy, supporting the business as mask demand fades. Homewares and home furnishings is the largest and fastest-growing category on a trailing-12-month basis. And Halloween-themed merchandise, like decorations and apparel, drove demand in the last quarter. This certainly has to alleviate the big concern on investors' minds about how Etsy would fare in a post-COVID world with the return of in-store shopping.
3. Etsy has a strong take rate
In order to keep increasing sales, net income, and free cash flow, it's obvious that Etsy needs to add more users and grow GMS on its platform. But another critical objective is to boost the take rate, which is the percentage of GMS that Etsy keeps as revenue.
"Excluding the acquisitions of Depop and Elo7 ... take rate was 17.5%," Glaser pointed out. This was up both sequentially and year over year and has improved significantly from 12.9% five years ago. The emergence of Etsy Ads, whose revenue grew 28% in the third quarter, helps to extract more value from sellers.
The take rates of subsidiary businesses, including Reverb, Depop, and Elo7, are lower than Etsy's main marketplace at approximately 10% combined. Therefore, investors should expect the overall company's take rate to be under pressure forward, but this isn't a cause for concern. These adjacent platforms expand Etsy's already-massive $1.7 trillion total addressable market, so shareholders should be pleased with the expanded opportunity to further penetrate the e-commerce sector going forward.
Based on the three key data points I've discussed above, I think it was another great quarter for Etsy. For owners of the stock, there's a lot to be happy about.
