Categories: NewsWorld

Etsy CFO taps into AI to perk up users with ‘depressed’ finances

FACED with an uncertain economic outlook, Etsy Inc. is looking for new ways to get its more than 95 million active users to spend. The online marketplace’s chief financial officer is counting on help from artificial intelligence and the cloud.

“People’s balance sheets are starting to be depressed, and we are at the discretionary end of a discretionary consumer product. And so we definitely feel it,” Rachel Glaser said in an interview on Bloomberg Chief Future Officer.

As Etsy’s CFO, Glaser sits at the intersection of micro and macro forces. After a finance career spanning almost 40 years and more than seven years into her role at the New York-based company, she is preparing to retire and make way for a successor. Glaser is also handing off a strategy to rekindle growth via technology investments at a time when the Federal Reserve is trying to engineer a soft landing after raising rates to combat a surge in US inflation.

It is a delicate moment for the platform that’s used by artisans to offer handmade wares. Second-quarter gross merchandise sales declined from a year earlier, emblematic of the slowdown that set in after the pandemic sent revenue surging and triggered a fivefold increase in the stock. That run-up has largely evaporated: at $5.8 billion, Etsy’s market valuation is up just about 12% since the end of 2019.

Glaser, 63, who plans to step down once a successor has been appointed, is highlighting her spending on AI, cloud computing and other technologies as contributors to future growth. One target: Making it easier for Etsy users to navigate its site and search for products.

‘Serve the good stuff’

“Being able to serve the good stuff to the top fastest is where AI can really benefit us,” Glaser said in the interview.

Etsy also invested in moving its business from on-premise servers to the cloud. The downside was a slump in net income margin. “We immediately contracted our margins just by making that move,” said Glaser. But having more company data in the cloud increases the speed with which Etsy’s machine-learning tools operate, resulting in “10 times the amount of traffic,” she said.

Under Glaser, a former Walt Disney Co. and Yahoo Inc. executive, Etsy pursued more than $2 billion of deals, including the acquisition of specialized marketplaces Reverb and Depop. Her team found “millions of dollars of savings” via an efficiency campaign, she said. The cutbacks included a restructuring plan announced in December that included eliminating about 225 jobs, or 11% of its marketplace employees.

Etsy’s technology initiatives offer reasons for optimism, said Poonam Goyal, senior retailing analyst at Bloomberg Intelligence. New features, such as “gift mode” – which suggests gifts based on a person’s interests, the occasion and other factors – are expected to drive sales, BI report said in a recent report.

Etsy’s marketplace captures about 1% in the $200 billion US gifting industry and a little more than 2% – or $38 – of the $1,600 that US consumers spend on gifts a year, according to a company presentation. “If they go from 2% to 3% or 4% or 5% over time, that would be a big achievement,” Goyal said. “I think they are doing all the right things.”

BI said gross merchandise sales probably will decline this year by a low-single-digit percentage as consumer discretionary spending weakens, but return to growth in 2025 and reach nearly $14 billion in 2026. That figure was $13.2 billion in 2023. Year-over-year adjusted revenue rose 0.8% and 3% in 2024’s first two quarters, the slowest since the company went public in 2015, according to data compiled by Bloomberg.

Etsy shelled out for a 30-second Super Bowl ad this year to mark the “gift mode” launch. “It was really successful,” Glaser said, adding that about 100 million people got to see the spot. Etsy hasn’t disclosed how much it spent on the advertisement, which “was never intended to be an ROI-positive investment,” according to Glaser, referring to the return on investment.

Marketing, she said, will remain an important spending priority. “I love marketing,” she said.

The company also ramped up its efforts to make sure sellers abide by its “handmade” promise. Differentiating between products is usually easy and clear-cut, Glaser said, but sometimes it isn’t. “We have this piece that we call the messy middle. The messy middle are things that people might wonder, ‘Why is this on Etsy?’” Etsy uses machine learning to detect products that don’t adhere to its policies, Glaser said.

Etsy’s business model, which doesn’t require spending on warehouses and distribution centers, generates high free cash flow, giving the next CFO “lots of choices with that capital,” Glaser said. Her successor, she added, “may come from another marketplace.”

Regardless of who it will be, the new finance chief might be navigating a weaker economy, depending on whether the Fed succeeds in pulling off a soft landing. Etsy “will have to be careful about the economy,” said BI’s Goyal. Glaser is set to remain with the company as an adviser through June 30. –BLOOMBERG

Dayang Norazhar

Recent Posts

BMBL ANNOUNCEMENT: Kessler Topaz Meltzer & Check, LLP Notifies Investors of a Class Action Lawsuit Against Bumble Inc.

RADNOR, Pa., Nov. 3, 2024 /PRNewswire/ -- The law firm of Kessler Topaz Meltzer &…

2 hours ago

Statement – Ministers of Veterans Affairs and National Defence mark 80th anniversary of the Liberation of Belgium

OTTAWA, ON, Nov. 3, 2024 /CNW/ - Today, the Honourable Ginette Petitpas Taylor, Minister of…

2 hours ago

Packsize Announces New Partnership with Henkel Adhesive Technologies

 Announcement advances the Packsize commitment to deliver industry-leading, sustainable packaging technology through strategic partnerships SALT LAKE…

2 hours ago

Huawei Proposes the FOUR NEW Strategy to Help Carriers Achieve Business Success in the Digital and Intelligence Era

ISTANBUL, Turkey, Nov. 3, 2024 /PRNewswire/ -- At the 10th Ultra-Broadband Forum (UBBF 2024), James…

2 hours ago

Huawei Proposes to Build an AI-centric F5.5G All-Optical Network to Help Carriers Achieve New Growth

ISTANBUL, Turkey, Nov. 3, 2024 /PRNewswire/ -- Today, at the 10th Ultra-Broadband Forum (UBBF 2024),…

3 hours ago

Rohrer Corporation Launches New Sustainable Product Line: EcoVolve™

WADSWORTH, Ohio, Nov. 3, 2024 /PRNewswire/ -- Rohrer Corporation is proud to announce the launch…

3 hours ago