With its recent increase in seller fees, this isn't the first time that Etsy (ETSY -4.40%) has raised rates and angered sellers. In this Motley Fool Live segment from "Ask Us Anything," recorded on April 11, Fool.com contributor Rick Munarriz takes a look at how Etsy can overcome this latest crisis and come out a stronger company.
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Rick Munarriz: Etsy is a company that I have been following for a few years and it's very interesting. Obviously what's happening is you never want to be in a position where your company is making headlines because your customers, your employees, anyone is not happy and especially you hear stuff like strike and then boycotts and all these things, it can spiral. Again, it's not that I'm dismissing a 30 percent increase in seller fees or anything like that, which is obviously a big part of the people that set up camp on Etsy and benefited from Etsy when it became a hotbed three years ago in the early stages of the pandemic when we wanted customized face coverings and other things that were more unique to us once we couldn't show our smiles or lack thereof, I guess in 2020.
But you do have a case where we've been through this before. I ask if anyone just goes back, in 2017, Josh Silverman came in as CEO. It was not popular with the employees. The old CEO was a very hands-on, happy, friendly, got along with everybody. There's a story that I think it was wired, basically his first meeting, his first introduction was this awful thing where it's like all the employees, there really was internal resentment to someone that was an outsider brought in with all these different ideas that they did not like. Sure enough, one of the first things he did, I believe in 2018, once he got his feet wet in the company, was he did increase fees. I believe it went from 3.5 percent to 5 percent, which may seem like just 150 basis points, but large on a percentage basis, almost like now. There was revolt.
But once Etsy made it clear that this increase isn't going into our pockets, we're going to do this to market our platform even more. Once the sellers on the platform saw that more buyers are coming to the platform. We're getting into this networking effect, and you're getting to the point where they're making more sales individually as sellers because there's more customers out there., everyone eventually said, "Okay, I get it. I'm not happy with it. I get it." That's not necessarily how this is going to end. But just to know that this isn't the first time that Etsy has raised rates and angered sellers. This is not a new event. This is part of any company that increases rates. It just happens. It's not every company that can just hold the percentage down and hope that just the sheer volume of gross merchandise volume being sold on it can help them out.
So I think it's a very interesting issue and obviously with the strike happening this week, we'll see, we want to see how this plays out. But know that just because a company increases prices, doesn't mean that people will stop coming. We see this with Disney. I'm not going to talk about Disney today. But we had a whole offer last week on Disney, but they raised prices and everyone is angry, but people still come. So we'll see what happens with Etsy, with the striking and the sellers and the fees. I think I'm optimistic that I think Etsy will overcome this and if it does get too loud, of course, that's a lever. You can also just go turn the not the other way if it gets somewhere where it's actually hurting business.