Etsy adds a new way to search using images

With a penchant toward boutique and handmade products, Etsy has many items that are so unique that they are tough to describe in words. A new search feature is helping to cover that.

The news: Etsy is launching a feature that allows users to search its marketplace using images. iOS users will be able to take a picture instead of typing words in the search bar.

How it works:

• Tap a camera icon in Etsy’s search bar.
• Take a photo of an item.
• Etsy will surface items from its 100 million-product-strong marketplace that are visually similar to the item in the photo.

Key quote: "We know that buyers often seek shopping inspiration outside of the marketplace, then turn to Etsy to discover items and make purchases. But sometimes they have trouble finding the right words to find the perfect items,” Han Cho, the product lead for Etsy’s buyer-facing mobile apps, wrote in a blog post. “That’s why the team built the image search feature from the ground up – leveraging Etsy’s first GPU-backed service – to give these users another, more visual way to make their inspiration a reality.”

Fun fact: The visual search tool was created at Etsy’s annual hackathon, called Code Mosaic, which gives engineers the chance to put new skills to work on new features and products.

'Tyranny of choice': During the company's earnings call, CEO Josh Silverman talked about how the company's search upgrade efforts are focusing on addressing the "tyranny of choice" for users. One shopper offered feedback to the company indicating that he got 400,000 results in a single search for lamps, which deterred them from digging in further.

"That's why it's so important that we narrow search results and get you to the good stuff fast, especially challenging since each person has their own idea of what the good stuff is," Silverman said. "We need world-class search technology married with world-class personalization."

Experience features: Along with image-based search prompts, Etsy has also incorporated seller reviews, on-time shipping performance, customer responsiveness and price into search results into its search engine, and video is now a part of search results. "We don't simply prioritize items that match your search query, but rather items that are the most likely to result in a delightful purchase experience," Silverman said.

Getting visual: The new feature comes as search is entering a more visual phase, with shopping functionality leading the way for this innovation. Google recently added more visual search elements to its results, with the expansion of a multisearch tool that allows users to take a picture of an item (similar to Etsy’s) and 3D viewing of a product. This week, Google Lens, which allows users to upload an image instead of type in words, was added to the widely-used search engine’s homepage. When the search leader is setting the pace and engineers are working out the product at hackathons, it's a good bet that this functionality is taking steps toward becoming table stakes.

While we're on the subject of Etsy...The marketplace reported third quarter earnings on Wednesday, and showed a big revenue bump of 11.7% over the same quarter of 2021 to $594.5 million. This was in part the result of an increased transaction fee from 5% to 6.5%. This fee hike was enacted in April and drew a rebuke that resulted in a seller strike. Meanwhile, the company said it was enacting the increase to invest in marketing and customer experience features – which is just the type of category where a new visual search tool fits. Other key Q3 metrics include:

Gross merchandise sales (GMS) across the company's platforms were down 3.3% year-over-year to $3 billion, and up 0.7% on a currency-neutral basis. Etsy cited impacts from "macro headwinds including reopening, pressures on consumer discretionary spending, foreign exchange rate volatility, and ongoing geopolitical events."

Etsy marketplace GMS was $2.6 billion, down 3.8% year-over-year. Non-US GMS for the Etsy marketplace was 44% of overall GMS, and increased 9% year-over-year on a currency-neutral basis.

Newly-acquired users on the Etsy marketplace numbered approximately 6 million.

For the fourth quarter, Etsy expects revenue of $700M to $780M. It is among retailers expressing uncertainty for the holiday quarter as the impacts it cited continue.

"We don't know whether consumers will spend more or less on gift giving, or whether they'll do more shopping online or in the mall," CEO Josh Silverman said in a statement. "But the good news is our business – with differentiated inventory across our House of Brands and a variable cost model – doesn't depend upon us taking big bets on these questions in the same ways most other retailers or e-tailers must. So we are doing all we can to help make sure Etsy sellers have the best holiday season they can – particularly in the face of continued economic uncertainty. We'll keep focusing on the things we can control – delighting our customers, investing with discipline and care, and helping our people minimize distractions and get the job done."

This article was updated at 11:30 a.m. on Nov. 3 to include additional details about Etsy's search upgrades.