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Thu Nov 24 2022 08:29:41

Etsy Will Adopt a Vertical Strategy in 2023

By: Ina Steiner

Etsy is now big enough that it can take a more vertical strategy in 2023, according to the company's CEO Josh Silverman. A "vertical" strategy means treating certain types of products differently, as opposed to all categories having the same features, policies, and level of marketing attention.

The CEO's revelation came during a Wall Street presentation on Monday during the 2nd Annual Needham Consumer Tech / E-Commerce Virtual Conference. Also in attendance was Etsy Chief Financial Officer Rachel Glaser, and both executives fielded questions from Needham Senior Analyst Anna Andreeva.

During the virtual event, Josh Silverman said the following about the vertical approach coming next year:

"We still have been working almost exclusively on horizontal capabilities, meaning we launch something that works for everything all across Etsy.

"We are beginning as we look in to 2023 to think more seriously about investing in some vertical experiences.

"Like what are some things you need when you're buying home furnishings that are specific to the category of Home Furnishings.

"And I think we'll find that there are some areas where building category-specific features are going to be valuable. And we're now big enough. We've had so much opportunity in these horizontals that it's hard to prioritize anything for a vertical, but Home Furnishings alone is billions of dollars of sales on Etsy now. So just making Home Furnishings better starts to be worth investments in verticals.

"I think things like getting the taxonomy and the browse views, using that as an example, is the kind of thing were looking at a lot more seriously."

Etsy rival eBay has been taking a vertical approach for several years with its "focus categories" strategy in Trading Cards, Sneakers, and luxury goods such as Handbags, Jewelry, and Watches. It has also developed category-specific features (Authenticity Guarantee and the eBay Vault, for example), and it has also been heavily promoting and marketing those categories.

Sellers who are in eBay's "focus category" sweet spot benefit from the marketing investments the company has been making - but maybe not so much sellers in other categories. However, eBay has said all categories benefit because its strategy attracts "enthusiast" buyers who spend money in other categories as well.

One obvious reason for marketplaces like eBay and Etsy to prioritize certain categories over others is in the hope of generating sales of higher-priced goods. Silverman described Etsy's "cushion to couch" approach in 2019. As we wrote at the time, should Etsy give more weight to lower-priced goods (the "cushion"), since that would boost conversion rates? Or should it give more weight to higher-priced goods (the "couch"), since that would boost gross sales? Silverman's point was that the company should be strategic about what factors go into the search algorithm.

But there are more sellers selling lower priced goods (cushions) than higher priced goods (couches), and they enable marketplaces to offer the broad selection of goods needed to attract shoppers to their platforms.

To understand the approach eBay took with its vertical strategy to get an idea of what could be in store at Etsy, here's a presentation from September's eBay Open event where three executives discussed the changes to luxury goods categories - Handbags, Watches, and Jewelry.

Let us know what you think of eBay and Etsy's approach when it comes to a "vertical" approach to features and promotional activities.